Real estate market stable despite pandemic and energy crisis

Twice a year, the leading economic institutes produce a joint diagnosis on behalf of the Federal Ministry of Economics and Climate Protection. It provides information on the direction in which the economy is moving.

According to the report, the German economy is steering through difficult waters and is experiencing the highest inflation rates in decades. In their spring report, the economic research institutes revise their outlook for this year significantly downwards. The recovery from the Corona crisis is muted as a result of the war in Ukraine, but retains the upper hand. The institutes expect GDP to increase by 2.7 and 3.1 per cent in 2022 and 2023, respectively. In the event of an immediate interruption of Russian gas supplies, a total of 220 billion euros in economic output would be in the fire in this country in both years.

The recovery process of the German economy is delayed once again. The abolition of pandemic restrictions provides an economic boost. The aftermath of the Corona crisis has a dampening effect because supply chains are still under stress. The shock waves from the war in Ukraine are weighing on the economy.

For the current year, the institutes expect an inflation rate of 6.1 per cent, the highest value in 40 years. In the event of a supply stop for Russian energy, even 7.3 per cent would be reached, the highest value since the Federal Republic came into existence. In the coming year, too, the rate of 2.8 per cent (in the event of a supply stop: 5.0 per cent) is likely to be well above the average since reunification. If gas deliveries are stopped, the German economy is threatened with a sharp recession.

Conclusion: This forecast reflects the environment in which property buyers are currently operating. In times of crisis, many real estate investors focus on security and look for ways to save their private assets. Therefore, tangible assets such as real estate are currently still in high demand, although interest rates, energy costs, inflation and construction costs should actually have a rather dampening effect on prices.

(Photo: © Willy Heidelbach, Pixabay)