Kai Enders (Member of the Board of Directors of Engel & Völkers) and Dirk Beller (Divisional Manager Engel & Völkers Commercial Germany, Switzerland and Czech Republic) will answer four questions on the effects of the corona virus on the real estate industry:
Mr. Enders, what effects do you expect the corona virus to have on residential investments?
Currently, not only the entire economy is facing major challenges, but also society. This combination of health and economic factors, which few of us have experienced so far, makes it difficult to predict further developments. But let's get back to your question: Housing is a basic need with a continuous cash flow of rental income from residential use, where the terms like concrete gold and safe haven come from among investors and will continue to apply in the future. At present, it can be assumed that the demand for residential and commercial properties will remain stable in the medium term.
Mr. Beller, we have now talked mainly about existing properties. What do you expect for residential projects?
Residential real estate projects face major challenges in the short term. I am thinking in particular of the partially closed offices responsible for the zoning procedure for planned new construction projects. But I am also thinking of further procedural steps such as citizen participation procedures or public relations work, which are made more difficult or impossible by the ban on contact. The expected limited availability of craftsmen through quarantine or other orders and entry bans from their home countries are also current hurdles. It could become difficult for property developers who are realising several projects at the same time and have thus exhausted their equity capital base too much. In the current situation, banks must examine very carefully. We know from some banks through our Engel & Völkers Finance division that no new customer business is currently being implemented there.
Mr. Enders, have you already noticed any effects on the sale of residential property?
In the past two weeks, sales in the global Engel & Völkers network have been relatively stable. However, the currently applicable rules for nationwide social life will have an increasing impact on market activity. Financing issues, property inspections and notary appointments are people business and in some cases also involve travel. Our room for manoeuvre is naturally somewhat limited here. However, we have long been well positioned digitally for advisory meetings and property inspections, which helps us in this situation. At one point or another, however, our customers have some concerns. Here it is important to advise them well in the current situation.
Mr. Beller, what effects do you expect in terms of price levels?
In the coming weeks and months, the current uncertainty will lead some market participants to be reluctant to buy and sell, which will result in a decline in the number of transactions. At the moment, it is not expected that demand for investment properties will decline significantly, because many private investors will rethink their form of investment like shares. The favourable interest rate level and the still comparatively attractive yields could further accelerate the flight into residential real estate. We therefore expect at best moderate price corrections in specific sub-markets in the medium to long term. In the short term, the sideways movement should continue or even form a price dent.
Do you have any questions? The Engel & Völkers Commercial team is looking forward to your contact.