Real Estate Investment After COVID-19: Potentials for International Investors

 

The COVID crisis has impacted the international real estate investment market in many ways. Prices are dropping and traditionally strong assets like retail properties, logistics, hotel, and office real estate are not as reliable as they used to be. For investors the current situation poses many risks, yet those with entrepreneurial foresight are already searching for the next big opportunity. Many have turned their attention to the German housing industry – with good reason: it is the most stable market at the moment and experts don’t expect this to change anytime soon. 

The European real estate market in crisis – Which assets are still reliable? 

The numbers are in and for investors who have been watching the European real estate market they look grim, especially when it comes to the commercial and retail sector. RCA’s European Capital Trends Q3 2020 shows a 43% drop in real estate deal volume compared to last year’s third quarter.

During the first and now a second lockdown in many European countries, numerous stores, restaurants and other businesses that were unable to pivot to online or remote offers have been forced to close, their storefronts and logistics properties remaining largely empty. Restrictions on national and international travel have made it difficult for hotels to keep in business. Prolonged periods of home office arrangements have done their share of decimating the value of office real estate as many companies have come to appreciate the fact that they no longer need to pay for large spaces to accommodate their workforce. The uncertain situation makes businesses hesitant to invest or plan for the long term, making a continuation of this downward trend likely and posing the question of how long it might take the market to stabilize once the pandemic is over. 

The housing market is the notable exception to this trend. Looking at the OECD stats for the last quarters, prices are rising in some European countries – despite the pandemic.

The German housing market has been traditionally stable – a chance for international investors even in 2020 

The German housing market is traditionally strong and has weathered the economic crises of the last decades much better than other markets. Thus, it may not be surprising to see it prevail during the COVID-19 pandemic, still there is reason to look more closely now since instead of mere resilience the OECD numbers show an accelerated growth. Compared to the previous year quarter, prices for privately owned housing real estate have gone up 6,8% and prices for apartment buildings have risen by 5,2%.

Local experts like Birger Dehne from Hannover, Germany’s biggest private housing portfolio holder, have been counting on the stability and potential of the German housing market for many years and are sure that the continued growth during the crisis is not a fluke, but the result of an ongoing trend that has been observable for many years. 

Dehne sees the move away from the busy and high-priced city centers to more suburban or rural areas as a logical consequence of the growing relevance of online shopping, social media and the opportunity to work remotely from home. The COVID-19 crisis has brought these ideas and trends to the forefront and many Germans are eager to improve their quality of living. When it comes to investing in the German housing market, Dehne recommends properties in B, C and D classes, which have been the cornerstone of his success for more than 20 years. Lower pricing, more space and greener, quieter surroundings make these classes attractive, not only during the COVID-19 crisis, but also in the future. Experts like Dehne are sure that even a prolonged second wave and an uncertain year 2021 will not change that. As it stands the numbers are on their side. 

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