In a Berlin Hyp survey, numerous members of the real estate industry were asked about the effects of the Ukraine war on the German real estate market. The vast majority of participants do not expect the real estate market to slump, but rather a dampener with moderate and slightly negative effects on the industry. Due to recent developments in the Ukraine war, it can be assumed that Russia will not be a reliable supplier of oil and gas. The gas taps from Russia have already been turned off in Poland and Bulgaria and it is a matter of time before we have to reckon with a temporary shortage of raw materials. The delivery bottlenecks and shortage of materials due to the war will drive up costs and make the prices, which have already risen in recent years, even more expensive. An investment in real estate in Germany is still considered safe and, according to the survey participants, the few Russian investors will not influence the development of the market.
Inflation, rising oil and gas prices, the scarcity of raw materials, disrupted supply chains and rising interest rates are all leading to a dampening and correction of the constantly positive development of the real estate markets in Germany.
Florian Koch, CEO of KOCH & FRIENDS Immobilien explains: The rapid price increases for apartments and houses in many sub-markets of Berlin will not continue after the steady development of the last few years and we are currently in a phase in which many market participants are weighing up and probably considering which steps to take at the moment are correct. After a long period of low interest rates, buyers are now confronted with significant interest rate increases and inflation. The own financial framework for an investment must be reconsidered and calculated. Due to the uncertain economic and political situation, the banks are extremely reluctant and allow this reluctance to flow into a credit decision. The property to be financed is examined more closely. The transaction times for a purchase are significantly longer due to long credit decisions. The location and condition of the property are more important than ever. If these parameters are not very convincing in the city’s sub-markets, the mortgage lending value for the buyer can increase significantly and lead to a higher equity ratio. This and the rising interest rates, which are already at 2.5% to 3.0%, often make a purchase no longer affordable. Sellers who do not currently have to sell are often postponing their decision and waiting for developments. Keeping the property in your own portfolio is currently a good decision that you only revise if action is required. Often a seller also lacks a new investment opportunity after a sale. How should the proceeds from a sale be reinvested? Shares and securities are an alternative, but this form of investment is also subject to significant fluctuations and often takes many years to realize significant profits.
Due to the large number of refugees arriving, the existing housing shortage in the big cities will increase. Many refugees would like to return home, but the outcome and length of the war is uncertain. Many Ukrainian specialists will settle their main focus of life in Germany, which increases the demand for real estate again.
Conclusion: The period of constant price increases is subdued for the time being and will certainly have a more moderate effect in the long term. In the sub-markets that are particularly in demand, the stagnation or slight drop in prices will certainly be less dramatic than in cities and sub-markets that are less in demand. The development of the interest market and the outcome of the war remains to be seen. In any case, this time has not left the real estate industry untouched.
