What is the appeal of residential real estate after the pandemic?
The pandemic has radically changed many processes on the global market. For some segments, it turned into a crisis, and for others into a new boom. Among the latter is residential real estate, which is experiencing a real boom in demand. Prices for houses and apartments in Europe and the U.S. are skyrocketing, but it does not diminish the enthusiasm on the part of buyers.
Despite the fact that at the beginning of the pandemic experts predicted the collapse of the real estate market, their pessimism did not materialize, and the segment has demonstrated record growth. In most countries, home prices rose significantly, and in developed economies, they broke records of dynamic increases. Experts believe that the main reason for this trend is the decline in mortgage rates to a historical minimum. Against the background of declining deposits at banks, this fact has become a great incentive for people to invest in real estate. In addition, central banks have pursued an active policy to support national economies, based on the infusion of money.
It should also be noted that in addition to profitable investment, buyers pursued other goals. Lockdown and remote format of work forced many to think about improving their living conditions – expanding the area or moving to a private house in the countryside from a small apartment in the metropolis.
As a result of these and other factors, in the summer of 2021, the average home in the U.S. primary market was $300,000, up 17 percent from 2020. A secondary property costs Americans $363,000, 23% more than in the previous period.
Real estate in Germany has not gone far from the prices in the U.S. Here in the 4th quarter of 2021, the annual growth rate was 11%, the dynamics increased by 2.4% over the quarter. A square meter of an apartment on the secondary market in the five largest cities in the country has risen by 9% to 2492 euros. As for new buildings, there is an increase of 8%. It should be noted that residential real estate in Germany demonstrates continuous growth for over 7 years since the beginning of 2014, prices have increased by 67%. The main reason, in this case, is the lack of supply, while the investment appeal of objects increases, which affects their value. And the demand is high not only for new properties but also for secondary ones.
In France, a price increase of 5% is observed, where a square meter costs about 2900 euros. While in Ile-de-France, last year prices rose by 9%, in Brittany, Normandy, and some northern regions of the country, they jumped by 10-15%. During the pandemic, demand for properties in Paris has declined, but in the suburbs, on the contrary, it has gained momentum.