David Borck explains how to avoid mistakes when buying real estate during the current coronavirus crisis
The coronavirus crisis has created fertile ground for widespread speculation and fake news, both of which are causing uncertainty among owner-occupiers and investors. Managing director and real estate expert David Borck is here to help you avoid the most common mistakes when purchasing a new home or rental property.
Mr. Borck, there’s a rumor going around claiming that banks are only willing to approve mortgages for civil servants and other government employees right now. Is there any truth in this?
It’s simply not true. Customers can still get mortgages approved under the same conditions as before the coronavirus crisis. One condition banks look for, for example, is a positive credit score from a German credit rating agency (such as Schufa). Another factor is a buyer’s general creditworthiness. The bank’s final decision will depend on how they rate an individual’s overall creditworthiness. So there’s no change there.
Is it true that banks are taking a lot longer with their mortgage approvals?
In our experience, the switch to working from home currently means that processing times are one or two days longer. After all, banks have also had to adapt their processes to the current crisis. The main reason that mortgage applications are taking longer to process is that banks have been inundated with requests for corporate loans. In our experience, it takes about three weeks to process a mortgage application.
And what about higher interest rates?
Our financial experts have confirmed that there was a short-term increase of about 0.25%. However, we’ve already heard from a few banks that they are planning to cut their interest rates again.
Do you believe that the next step will be for property prices to fall as a result of the corona crisis?
Unlike stocks, real estate is a crisis-proof investment because it is not affected by short-term fluctuations. Real estate assets will therefore remain attractive to investors. Owner-occupiers can also aim for a higher return by buying rather than paying rent.
Speaking of owner-occupiers, are you worried that there could be a wave of foreclosures in the second half of 2020?
No, that’s not what we expect at all. Banks are already reacting to current financial bottlenecks and are looking for solutions for their customers, as observed by our mortgage brokering experts. For example, some banks are offering mortgage holidays of up to six months. Unfortunately, most tenants cannot expect to receive similar offers from their landlords.
Would you still recommend buying property in the current situation?
There is no one-size-fits-all answer to this question. Each potential buyer still needs to conduct their own examination and analysis of any real estate purchase. However, property is always a long-term investment and is not as affected by temporary crises or market fluctuations. Therefore, I would always advise people to buy property, but only if their personal financial situation allows it.
How are you dealing with the current situation in your real estate agency?
Of course, we are also adhering to all of the coronavirus protection measures and most of our employees are working from home. However, it is still possible to view our properties, for example via a private viewing – sometimes without an estate agent. We have also expanded and enhanced our portfolio of digital services. For example, we now offer viewings via video chat, as well as immersive 3D tours with 360-degree functionality. These are already available for selected properties on our website at www.david-borck.de. We are also still offering our free and independent financing advice. With the coronavirus crisis affecting all areas of public life, we are of course doing this by telephone. Thus, we are able to offer our customers a full range of specialist services – without any risks to their health.