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German Real Estate Market Forecast 2021

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Prices continue to rise

It is expected that the rollout of vaccinations over the course of the next several months and an end to extensive lockdowns will finally provide some economic relief in Germany. Property prices are projected to continue rising over the next year, due to persistent demand for housing—-especially in large cities such as Berlin-—outpacing the availability of apartments and homes. With demand surpassing the supply of new homes, the current house price cycle looks to continue its sustainability over the next year at least, according to Deutsche Bank. However, while the current market favours sellers, the dependability of the German real estate market remains attractive for investors.

The property market in Germany remains stable in 2021.

Changing demands

These projections are mainly for residential properties in metropolitan regions of Germany, as the economic implications of lockdowns have slightly decreased demand for many commercial spaces, such as offices and retail shops. That being said, 2020 still saw an increase in prices of commercial units. However, it is expected that even after the pandemic has waned, there will be a reduction of onsite office work and shopping. Moreover, buyers are increasingly searching for housing with more space—-space for home offices conducive to the demands of remote working; space for home workouts with the closure of gyms; and apartments with more room for multifaceted-living while a large portion of Germany’s population spends significantly more time at home. Along those lines, we are seeing many homebuyers moving outside of the city centres and more into outskirts and embracing countryside living. Buyers are also searching for more sustainable homes. Especially with financial incentives, such as the stipend from KfW, homebuyers are attracted to new-build apartments with energy-saving and eco-friendly features.

Despite an economic downturn last year, hopeful predictions show a promising future for real estate in Germany.

Profitable investments ahead

While the Berlin rental cap may have deterred some investors, in general, 2020 saw that investment properties continued to be profitable. With a huge rental population, buying rented apartments is still considered to be an excellent investment. With the upcoming constitutional court decision coming later this year to determine the outcome of the rental cap, investors are staying positive and enjoying profitable yields from rented apartments. It is also expected that interest rates will remain relatively low over the next year, making the low-risk stability of real estate investment in Germany all the more attractive to investors. Prime yields in the sector have not softened, despite the economic recession. Properties that provide a high yield and a stable cash-flow during the crisis and after are in demand now more than ever.

Buyers see new favorability

As the demand for housing continues to outpace supply, real estate prices in Germany are expected to continue to increase throughout 2021. Sustained low-interest rates (which are expected to rise gradually) and recovering economies are predicted to continue propelling prices. While the market will stay seller-friendly, new German laws concerning commission payment favour buyers. A lower commission fee in addition to low-interest rates evens out the playing field between buyers and sellers in Germany. Combined with the many financial incentives the government provides to first-time homebuyers and low-income families, buying property in Germany is expected to stay accessible throughout the fiscal year.

A smaller commission fee and low interest rates make the market a good place for buyers.

How 2020 changed the game

Many businesses went almost completely digital in 2020, and the real estate sector was no exception. In order to comply with lockdowns and limited contact, real estate companies embraced a technological approach to keep buyers and sellers safe. At ZIEGERT, we are utilizing virtual 3D tours of apartments, provide video call consultations and tours, and have all materials available in digital format. For undeveloped apartments or unfinished new-build projects, we have expertly-designed virtualizations to help you envision the completed space. This kind of innovative digitalization of property selling isn’t likely to change, with more real estate agencies adapting to the need for online tools, and buyers looking for convenience and flexibility in their search for a new home.

A bright future for forward-thinking investors

Despite the uncertainties, losses, and radical change of the last year, the German real estate market has gone unscathed and continues to prosper. Projections expect a continuation of rising house prices as demand surges, and a market that favours sellers, but with benefits to buyers such as a lower commission fee and historically low-interest rates. 2021 will see a continuation of the effects of the pandemic, with more families looking to buy spaces that suit their multifaceted needs, including space for remote working and more sustainable homes. Rented investment units are expected to continue providing a profitable yield. The digitalization of the real estate sector will likely be a more permanent transition, finally bringing the historically unprogressive industry into the digital age. Overall, 2021 is an ideal year to purchase a home in Germany.

Written by:

Catherine Norris

Tennessee native Catherine loves writing about her new home in Berlin. From interior design inspiration to new developments in the German real estate market, Catherine’s got it covered.

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