Residential real estate will continue to be at the forefront of investors' strategies for 2022, particularly rented apartments (condominiums), according to a new study by German property association IVD. If anything, investor interest in real estate overall would seem to have increased since the onset of the pandemic, conclude the study's authors.
IVD's Market Outlook 2022 sees investors unfazed by rising prices and a subdued rental trend, following years of steady upward movement. Against a background of high inflation and still-low interest rates, the study concludes that investors are still viewing residential housing investment to be crisis-resistant, irrespective - at least for now - of rising prices in the big cities and the slowdown in rental momentum due to new housing construction.
Jürgen Michael Schick, IVD's president, says: "We are currently experiencing a stabilisation of rents for new buildings, which will continue in the coming year." With all this new construction, the IVD expects rents to develop moderately, below the rate of inflation. In some cities, existing and new rents will remain static, and in some places they will even fall. "Particularly in the upmarket new-build segment in medium-sized cities, there will continue to be stronger price declines for new rents," said Schick.
IVD is predicting a rise in the prices of apartments in larger cities (above 100,000 inhabitants) of between 4% and 7%, with a nationwide average increase of 5%.
There is now a trend reversal in the population influxes into the biggest cities, after years when they all saw their populations increasing. Of the Big 7 cities - Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Düsseldorf and Stuttgart - only Hamburg is now not showing a negative migration balance, the IVD figures show.
Berlin, the largest city, saw net immigration in 2019 of 23,321 new residents but this turned into net 'emigration' of 1,958 in 2020. Munich went from plus 8,602 to minus 2,870 and Frankfurt from plus 6,731 to minus 2,319 inhabitants in 2020, the last year for which figures are available. COVID has had a big role to play in this, with people moving from the expensive big cities to the better-value smaller towns and rural regions.
In commercial property, landlords of prime retail space in the big cities are facing increasing demands for smaller retail spaces and new concepts, and a growing problem of rising vacancies in the less-than-prime spots in medium- and smaller-sized cities. These problems will become more entrenched in 2022, says IVD. The outlook is not as gloomy for the office market which have so far survived the COVID years of 2020 and 2021 relatively unscathed. Rent declines of 3% to 4% at most are expected, says IVD.
The study's researchers report that more than half (56%) of Germany now consider real estate to be a "sensible capital investment" for private wealth accumulation - a figure supported by a YouGov study on behalf of CommerzReal. Real estate was followed by gold (38%) and then shares at (32%).