The corona virus: Effects on the real estate market
The corona crisis has far-reaching consequences for the economy. Uncertainty is spreading, even among investors. Stock market indices around the world are already falling uncontrollably. Investors are withdrawing, savers are worried about their money. In this article, we explain to you what effects the corona virus has on the financial world, in particular on the real estate market, and give you an outlook on market developments following the corona crisis. We'll also tell you why now is the best time to invest in real estate.
The financial world in crisis mode
The DAX is falling, further price falls and share slumps are foreseeable, and the outcome of the crisis is uncertain. In these times, many investors are right to ask themselves which alternative course of action is the right one. First of all, it is advisable not to act hastily, but to consider the factors that speak for or against selling stocks. The first factor is your own investment strategy. As an investor with a long-term investment strategy, you shouldn't be tempted to rush money out of your investments. It makes more sense for long-term investors to simply wait out the price fluctuations and wait for the panic to calm down.
As a short-term investor, on the other hand, you are usually better off selling your shares or at least hedging your securities accounts with stop prices. The second decisive factor is what type of stock it is. Investments in companies whose industries will be particularly severely affected by the corona crisis and, above all, in the long term, should be sold. Sectors that will be negatively affected by the consequences of the crisis in the long term include the tourism, automotive and pharmaceutical industries. But asset classes such as gold and crude oil also suffered severe slumps as a result of the Corona crisis.
Real estate as a shock-resistant investment
However, there are also industries and markets that are little or not affected at all by the negative effects of the corona pandemic. This is the case with investments in the real estate sector. The reason: Real estate is tangible assets that are considered stable in value. This means that they retain their value even if the value of money falls due to inflation, for example. For this reason, tangible assets such as real estate and land are attractive investment options, especially in times of crisis. In times of crisis, there is therefore often an increased demand for tangible goods, meaning that investments in the real estate sector can even gain in value while the rest of the market is on a downward trend.
This is also reflected in the current Corona crisis. Compared to other industries, recent events have so far had no negative effects on the real estate sector. However, it is still unclear at this stage whether this will remain the case over a longer period of time. Real estate prices in German cities are currently stable; so far, no abnormalities have been recorded for 2020.
Investments in stable residential properties are particularly in demand in times of crisis, as they guarantee continuous rental income. Rental contracts usually have fixed contract terms and are therefore not affected by price fluctuations on the market. Expert forecasts also point to a continued increase in the value of real estate. These are calculated over the long term and are therefore largely independent of the effects of the corona crisis. As part of minimizing risks, new construction properties in sought-after locations are particularly suitable. A further increase in value can be expected here.
How will the market develop?
It is currently unclear in which direction the real estate market will move in the future. Price fluctuations in the real estate sector are taking place rather slowly, if at all, so that the exact development will probably only become apparent in a few months. However, regardless of crises, living space and living space will remain a sought-after asset and therefore also a worthwhile investment in the future. In large cities in particular, there is still a problem that there is a shortage of housing. In view of this situation, demand for residential properties will continue to be high. Some fear low demand for office space due to the current home office regulations of many companies. However, this is also more of a temporary measure. It is relatively unlikely that home office will primarily be used as a working method even after the crisis. It could therefore be that the corona virus will lead to a halt in the real estate boom and to stagnation or a slight fall in real estate prices in the short term, but in the long term, the real estate market will continue to flourish as usual.
