Throughout the entire region, we have witnessed a boom that has lasted for more than ten years without any significant real estate vacancies, particularly noticeable in the residential markets of metropolitan cities. In recent years, the population of Bonn has increased by more than 5 percent and that of Cologne even more so. This growth comes with a rising demand for housing that clearly exceeds availability and outpaces development. In the past, the increasing shortage of living space has led to an increase in prices that has been criticized, in some cases massively. These circumstances have been observed in recent years, they are just as evident at present and will undoubtedly remain the same or similar in the medium to long run.
Interest rates have been at almost unimaginably low levels for some time now. In the coming years they will remain low throughout Europe and probably beyond. Against this backdrop, falling rates of return due to relatively sharply rising purchase prices will still remain attractive. Since the liquidity of many private and institutional investors has hardly been affected by the crisis and loans continue to be granted according to strict guidelines, a relatively large amount of equity capital is being used when buying apartments or houses. The discussion about price crunches, which is often associated with bizarre ideas of a new real estate bubble, will have nothing to do with the reality for the foreseeable future. On the contrary, the stability of regional housing markets will continue to increase due to the uncertainty exacerbated by the crisis in other sectors of the economy and on the capital markets.
The high volatility of crisis-ridden stock markets is consolidating and strengthening the interest in residential property. Perpetual wave movements drive capital into safe havens. Difficult circumstances in other sectors of the economy, such as tourism, will steer investments even more in the direction of residential properties. Pension funds or insurance companies have strict requirements regarding the security of their investments and will thus place even greater emphasis on the long-term stability of tangible assets in view of the massive losses on the international stock markets. In the medium term, the greater impact on special-purpose facilities in the retail, commercial and industrial segments will mean that residential properties will gain even more attention. To use the international jargon, this means that residential will outpace retail, commercial and industrial.
Therefore, it appears that after the crisis, residential housing will become even more important in the Rhineland metropolitan region and will increase in value for many people. After the crisis, safety will take priority over consumption and the desire for new things. Safety at home will become even more relevant for us. I assume, for example, that trips to London, Paris or Milan, to the Caribbean, the Balearic Islands or the big wide world will be less important. We will also avoid purchasing things and invest more in our own home. When we have survived this crisis unharmed, most or at least many of us will stay in our familiar surroundings for the time being. Deep-seated changes, unsettling experiences and the associated feelings need time to be digested and overcome. It is unclear whether and when we will experience something like this again. Since we will postpone anything new or anything that was originally planned before the upheaval, the fluctuation in existing housing will decrease and lead to contemplation and reflection instead of moving. However, the demand for new building projects remains largely unaffected by this. There are still far too few new construction projects for the decline in demand to be noticeable. Again, the opposite is more likely to hold true. When the process of design and development is interrupted and approvals come in late, potential customers become even more active. All in all, the crisis is changing the regional housing markets only slightly; the changes will be short term and are restrictive only in exceptional cases.
If we switch from a bird’s eye view and take a deep dive into the industry’s structures, we can see that the sector’s main changes are happening in the digital social sphere. These changes were triggered by social distancing, which should not be confused with social disconnecting and is better described as physical distancing.
The disruptions to the way we live and work together have not only led to a significant revival of social networks such as Facebook, LinkedIn and Instagram in the real estate industry, but have also enabled companies to work with Slack, Teams or Zoom etc. in no time at all. Both internal and external corporate communications now take place through virtual channels. Naturally, we are all digital and digital has become natural. The use of digital media has reached a new peak in an excitingly unexcited way, which is likely to have a significant effect during the year 2020 through to the introduction Sam, the property-showing robot. Our customers decide independently how to orient themselves in the real estate markets and I have always considered it my job to offer them all the opportunities to be able to do this. The amount of financial and material assets hardly changes in these times of crisis, but the ways in which they are moved do. Personally, I find the new self-determination of the parties very accommodating. Stability and perpetualness do not imply a return to normality and old habits, but they accelerate the advent of virtual real estate worlds. Our homes are increasingly becoming more natural elements in the internet of things.
We continue to provide reliable, high-quality advice – even at a distance. For example, video chats with virtual presentations or online conferences with reliable service partners and notaries, who of course work with our clients online. All this would have happened sooner or later anyway. However, the coronavirus has brought incredible momentum to the virtualization of the real estate industry. Without Covid-19, some of the things that have suddenly become commonplace would be a long time coming.