Real Estate
Almost every day, an investor or a house seller asks me how prices on the German real estate market will develop as a result of COVID-19. Or what the current demand is. Or what role the incredibly high new national debt in Europe is playing.

Will these factors depress prices? Will real estate prices spike? Will there be no change at all?

It’s challenging to give entirely accurate answers at this stage. But, here at AllGrund, our daily real estate dealings seem to reveal specific concrete trends, as well as potentially clear answers.

Is the COVID-19 crisis really over? Does it matter for real estate?

Empty streets
Empty streets during COVID-19 lockdowns

We will only know this for sure when the borders are open again. When free movement within and outside of Europe is possible, and when infection rates remain low. And whether a second major wave will not follow in autumn or winter is a matter for debate; nobody can rule that out.

But whether there will be a second wave or not is moot at this stage. We are at a lull period now, an interlude.

What do people do when they can finally sigh a breath of relief after a great upheaval?

People seek security. They seek stability.

From our conversations with people at the moment, we can tell that they want to be better prepared for any similar future crisis.

Most importantly: People want to invest in a better home office.

Increased interest in the home office — good news for real estate

Home office -- Unsplash
Home office

The next shutdown, the following home office. After all, there is always a home office within your own four walls.

Whether these four walls are rented or owned is secondary.

The new question is now this:

Do I feel comfortable in the four walls where I had to spend the first shutdown, run the first home office and endure the annoying children and the even more annoying spouse? Or were those four walls small, confining, oppressive? Can we afford a better family home?

Much of what is going on inside people’s minds at the moment is shaped by what they have had to endure in the last few months.

Without a doubt, real estate plays a significant role in making decisions, perhaps even the central role.

Will inflation affect buyer patterns?

Euro money
Will inflation rise now?

Then there are fears about the future. What good is money in the bank if it won’t be worth much tomorrow? Who can guarantee that inflation doesn’t skyrocket, thereby crashing the Euro?

Here too, we’ve spotted a noticeable tendency emerging among potential buyers: to invest their money in a property, a house, an apartment, or an investment object, before that money loses value.

People want to sell property in Germany

Over the last few days, we have received numerous enquiries from people who want to sell a property. Some of those properties can already be found on our homepage or on the various real estate portals.

And the fantastic thing is this: The demand is stronger than ever!

But demand for what? Not excessive, attractive houses or apartments which are primarily sought after by owner-occupiers. On closer inspection, we find that these are all older properties with interesting characteristics, which differ from the newly built properties by larger plots of land and a manageable need for renovation.

From what we’ve seen, people are looking for more space. Space for children to run around in, even when playgrounds are closed.

Buyers aged 70+ want less space, younger buyers want more

Small house
Older buyers are looking for smaller houses

In contrast to the younger generation, which we have observed are now looking for larger properties, we also serve a 70+ target market which appears to be doing the opposite.

But the demographic is more complex than that: We serve a highly-specific and niche market of seniors who are willing to sell their houses provided they are assisted in finding a better place to live.

The houses they are selling are usually fairly old and rundown. And they are seeking domiciles which are more suited to their age and needs.

This target market has also grown wiser as a result of the coronavirus crisis. Where the young family seeks more space, such space is often too much for the older crowd.

Taking time for the problems of this target market is incredibly important: Listening to them, helping them in every aspect of real estate, assisting them in reaching their real estate goals and still giving them the necessary freedom to make their own decisions.

Further observations on younger and older buyers

If you will permit me, I’ll make a personal observation on the 70+ and younger buyer groups.

I feel that the 70+ generation is generally a cheerful one. I have found that they wear their heart on their sleeve and don’t let themselves be thrown off track by bad news regarding COVID-19. Many of them are doing well financially and make a good living with their pension.

The younger generation, on the other hand, is more challenged than ever. They are certainly up against more difficulties than this 70+ generation which went to school during the economic miracle, and lived the bulk of their lives in a pre-9/11 world. 

Real estate financing trends

Big banks rejecting loans

The following procedure is common practice today: The customer is wildly determined to buy the property. Now he goes to his bank or, more likely, to a financial intermediary, to establish financing.

Then the long wait begins.

There were times when financing was approved within a single day! The customer could notarize, and everything was fine. It hasn’t been like this for a long time.

COVID-19 has made the waiting periods worse. Two to three months are not uncommon.

The checks on loan applications now take a long time, far too long.

Buyers who do not need financing have a clear advantage. But they are rare.

We have also heard of incidents where, as a result of COVID-19, financing already committed has been withdrawn or reduced. In other words, a higher risk-rating of the planned project has been determined. 

The most blatant case is one where a major German bank suddenly withdrew a financing commitment of € 31 million from the period before COVID-19 and wanted to finance only € 22 million for the new construction project. This happened to a well-known property developer. 

The generous hand of many large banks often becomes a clenched fist when it comes to granting loans. There are often alternative possibilities here with smaller, regional institutions. The future trend could be “Why go to the big banks when you can get much better service from the small ones?”

And what about the low interest rates?

Everybody we hear from says they will remain low for quite some time. One of the reasons is the high national debt because, with higher interest rates, some states in the Eurozone are very quickly close to bankruptcy.

Whether negative interest rates on high capital deposits are the right instrument, however, is something that some dare to doubt. After all, this is precisely what leads to liquidity being withdrawn and invested in real estate or other tangible assets (gold, investments, other stable assets).

Whatever the case, Germany still plays a leading role in the European Budget, and what happens here will determine what happens in the rest of Europe. 

Supporting industries

The construction industry will pick up again soon

Life came to a standstill with red lights all around during the global lockdowns. But the traffic is rolling back on with momentum towards a new age.

In house construction, there are numerous innovations afoot. They only require the necessary financial means and bundled strength of the housebuilders to ensure their implementation.

Also in construction, the increasing demand for environmentally friendly products might itself create a boom.

Whether for the renovation of old buildings or the construction of new ones, genuine inventiveness and true entrepreneurship at the grassroots level is required and demanded here.

What will not continue, are harmful developments with negative environmental impacts such as insulation materials whose service life of 20-25 years will lead to a considerable disposal market for hazardous waste. A young, talented engineer and an innovative team can start working today on how to get rid of this material without creating further adverse effects on the environment.

Long-term and holistic thinking will have to dominate if this planet is to have a good future. Large industrial lobbies will have to make way for sensible developments. And from their profits, they must also promote such developments. Politicians will not be able to ignore this demand.

Which brings us back to real estate.

What is the future of the German real estate market?

German flag in distance
There is one factor we have not yet examined. What does the economic slump mean?

That slump is set to catch up with us like a tsunami.

Twenty percent unemployment in the USA, countless destroyed livelihoods, a collapsed international air transport network — these scenarios cannot simply be wiped off the table.

Germany is not doing badly when compared to the rest of Europe. And Europe is not doing badly when compared to the rest of the world.

The building boom — whether new construction or modernization — continues unabated.

But orders for new residential construction have stagnated, and it is questionable whether they will pick up again if the influx of foreign capital fails to materialize. Many foreign investors invested in German real estate and brought capital into the country which pushed prices up and fueled the construction boom. Chinese investors, in particular, have been at the top of the list in recent years.

Commercial real estate

Not only residential construction could be affected. What about commercial real estate? It has been suggested that the home office is the way of the future. (By the way, I made this statement in one of my books from the 1990s.)


Home offices mean less need for commercial space — a topic that is already hotly discussed in relevant forums and media.

Vacant commercial properties usually lead to a decline in demand for residential property. Those who can work from home do not have to go to the city to live in expensive luxury homes.

Urban living will not lose its importance, but it will return to what it has always been — living in the city for all who love the city, at reasonable and affordable prices.

The market will regulate this without any state intervention. This also applies to the attempt to use rent brakes and other questionable means to cover the market.

If foreign business slumps by 5, 10, or 15 percent this will be felt severely. One way or another, the market for commercial and residential property will follow suit.

If prices go down, the land transfer tax, so urgently needed by local authorities to keep their households healthy, will also fall.

The land tax reform planned for 2025 could also be affected by this. The attempt to fix land tax at the location, and the standard land values, for seven years at a time, could lead to fierce resistance by those liable for land tax in the event of a reversal of the purchase-price trend.

Conclusion — where to invest?

Piggy bank and small house on table

In this highly globalized world, the economy is more dependent than ever on each cog in the wheel that comes under pressure and subsequently breaks down. The interactions of small, seemingly inconspicuous occurrences could ultimately be much stronger than we currently suspect. After all, an infinitely inflated state treasury with generous aid and subsidies cannot absorb what the economy itself is unable to provide. Neither in Germany nor in Europe.

Rather, it will be the work and courageous commitment of each individual that counts. Even the courageous efforts of a banker who supports an entrepreneur with a loan and believes in him. The courageous commitment of a building contractor who puts his own profit second and maintains jobs through the crisis.

I am reminded of the situation in Europe after the Second World War:

  • A largely destroyed image of the big cities
  • Destroyed confidence of people in their ability to deal with things without resorting to weaponry
  • Focusing on coexistence and reconstruction, slowly sorting things out
  • Putting attention on building trust among enemy nations

Perhaps the greatest success story of humanity is creating a golden age of economic life, culture, and education.

The dynamic that was created then can be repeated today. For it is inherent in human nature. Whatever happens, we will go through it and rebuild the world anew. I am not the only one who sees a great opportunity in the crisis.

Because no matter how Covid-19 shows his teeth, it’s up to humankind to emerge from it successfully.

And what does that mean when you think about how to invest your money now?

I can only give you one answer to that: Invest it in a way that will most benefit you, your family, and our society as a whole.

Credits: Photos in this article were sourced from Unsplash, Pexels, and Pixabay