Real estate in 2021: What to look out for
The Covid-19 pandemic has rewritten the rules of the game and had a noticeable impact on the real estate market, although it is true to say that our industry has weathered the crisis quite well so far. But what does the future hold? Based on the enquiries we’ve been getting from readers, a lot of people are asking themselves the same questions: Where is the market heading? Should I buy or sell a property now or would it be better to wait? What new laws have been passed recently? Is there anything else I need to know? There is a lot to consider. Reason enough to take a look at what lies ahead.
And before anyone starts to worry, property buyers and sellers alike can look to the future with confidence.
Crisis-proof and high-yield: Residential real estate as a safe harbor for investors
Now is the time, this is the place. While other investments are barely generating any positive returns right now, real estate is still going strong, even in the midst of the coronavirus crisis. This sends a strong signal: Prospective buyers are attracted by stable and rising property prices, especially in the residential segment. And there are no indications that prices are set to fall anytime soon. Unsurprisingly, the clear recommendation is “buy.” If you have been thinking about buying a property, you would be well advised to act today, not wait until tomorrow. The longer you wait, the higher the price. Why? Because housing in metropolitan regions is scarce and will quickly rise in value throughout 2021. This makes real estate an ideal place to store your capital.
A sellers’ market: Prices for suburban condos are rising
Let’s get to the main feature of the real estate market in 2021: stability. The market is proving more resilient than ever before – and that is not likely to change any time soon. Experts are almost unanimous: unhampered by a weakening economy, residential property prices will continue to rise significantly this year. Demand for homes, especially in the suburbs and on the edges of Germany’s largest cities, will increase because that is where land is still available. Looking after children, doing the bookkeeping, running daily errands, getting the most out of life: many people will be working from home for the foreseeable future. And this will make properties with gardens or balconies even more sought-after than ever before. The situation on the hotel and retail investment markets is somewhat different right now. Some are experiencing vacancies because the lockdown has knocked out their business.
Interest rates remain low – making houses more affordable
House prices are rising and are not about to fall any time soon. As an investor, however, there is a silver lining to all of this: interest rates look like they will remain at historically low levels throughout 2021. As you know, interest payments account for a not inconsiderable proportion of the cost of buying a house. Why are interest rates so low? Well, in order to support the economy, central banks have cut interest rates across the board, which has caused mortgage rates to tumble. And the benefits are being felt by property buyers of all shapes and sizes, because they get to save money. If you are clever, you will take advantage of this historic opportunity to save – and secure an attractive mortgage during this year. Winners act early. Now is the time to invest your money safely.
The Berlin rent cap: A never-ending controversy?
It’s a very prickly topic. The Berlin rent cap has cast the city into completely uncharted territory. Never before has a federal state or a city planned and actively promoted anything like this – and criticism of the rent cap is not about to subside. After all, the rent cap means that the rents for two million apartments are practically frozen at June 2019 levels. And for a period of five years. But where do federal legislators and the courts say? Well, in the first half of 2021, Germany’s Constitutional Court will rule on the lawfulness of the rent cap. It remains to be seen whether the judges in Karlsruhe will uphold the law.
Rent index 2.0: “After-the-fact” rent adjustments in the German capital
Raise the rent, no problem? Not if Berlin’s Senate Department for Urban Development has its way. The department has recently issued a clear opinion – and expressly vetoed such an approach. According to officials, tenants can now apply to have earlier rent adjustments reassessed. During the course of these rent reviews, landlords will need to provide the authorities with a variety of information upon request, including documents relating to any additional costs that have contributed to the rent increase. But experts have raised a series of objections. With the new expanded rent index, the city’s officials are increasingly restricting the freedoms of the real estate market. Is that fair? Questionable. The problem: Landlords and apartment owners are being forced to delay urgently needed investment and renovations until the situation becomes clearer.
Brokerage fees have been standardized nationwide
How much commission can a real estate agent charge? A new law passed by legislators in December is a hammer blow to the industry. The new regulation on brokerage fees means that, with immediate effect, fees have been standardized across Germany and sellers and buyers will both pay a 50% share. The decisive factor is who commissions the broker. In Berlin. In Leipzig. In Munich. And every other city in Germany. Why? To more fairly distribute financial burdens. However, it is not possible to predict the long-term impact the new law will have on the real estate market.
Optimism and a strong partner
Our outlook for the real estate year 2021 couldn’t be clearer. Anyone who is looking to invest in real estate over the next few months needs to consider their options and adopt an appropriate strategy. The basis of any successful real estate investment is a long-term strategy – whether you’re a financially savvy investor or an owner-occupier. And the right decisions depend on the right people. With us as your strategic partner, you have every reason to be confident about the year ahead.
David Borck Immobiliengesellschaft mbH offers you best-in-class service and support whether you are buying or selling real estate – from professional initial consultations to real estate valuations and advice on all relevant matters. Let’s discover the opportunities together!
We are looking to hearing from you.
David Borck Immobiliengesellschaft
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