11 November 2020

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Hardly any negative corona effects on Munich's residential property market: purchase price stagnates at a high level - demand remains high

  • Online press conference by Becken and bulwiengesa on the current situation
    on the Munich residential property market
  • By 2025, an additional 10,800 new homes per year will be needed
  • Purchase processes of residential property by end consumers are extended by four to six weeks in the
    Corona pandemic
  • New construction project HOCH DER ISAR of basins with current sales rate of 28 percent

Munich, 11 November 2020 : Munich's residential property market will remain tight in the coming years. A corona effect on the price development of residential property is therefore not discernible. By 2025 the population of the Bavarian capital will grow to 1.59 million people. In the same period, Munich will need around 10,800 new residential units per year to meet the additional demand for housing. Meanwhile, the corona crisis is prolonging the purchasing process by four to six weeks for end consumers. At the same time, the awareness of prospective buyers of condominiums is growing that residential real estate is a safe investment even in the corona pandemic, according to the experience of project developer Becken.

These are the key results of today's online press conference on the Munich residential property market held by project developer Becken with the research company bulwiengesa.

Munich housing market defies the Corona pandemic

Dr. Heike Piasecki, Branch Manager and authorized signatory at bulwiengesa, comments: "Many factors speak for a continuing high price level on the Munich housing market. Although the number of unemployed people in Munich rose by around 116,000 by October 2020 in the wake of the coronavirus crisis compared to the previous year, the rising population, the high level of purchasing power and the increase in employees subject to social security contributions forecast up to 2025 are among the factors that are causing high demand for housing. At the same time, the completion rate is lagging far behind both the demand and the goals the city of Munich has set itself. And Dr. Piasecki adds: "By 2025, 10,800 apartments per year would have to be completed; between 2015 and 2019, an average of a good 7,000 units would be completed. Unless construction activity picks up significantly, the shortage will continue in the future."

The purchase prices will increase slightly and thus remain at a high level in the coming years, according to the forecast of bulwiengesa. On average, the prices for residential property in Munich currently stand at 9,000 euros per square metre. In the peak around 17,000 euros per square meter. The Haidhausen sub-region is one of the factors determining the high level. A look at the price categories of the offers reveals: condominiums in the lower price categories up to 500,000 euros have been practically non-existent since 2016. Dr. Piasecki explains: "One of the main reasons for the large price leaps in the condominium market in recent years is the high prices of building land. Since 2010, these have risen more than 3.5-fold. In 2019 alone, the rate of price increases for residential building land was 8 percent."

Changed conditions in the sale of condominiums

In the middle of the corona crisis, project developer Becken began the preparatory construction work for its HOCH DER ISAR residential property project in the Au-Haidhausen district. In the meantime, the residential ensemble of 185 freehold flats is undergoing building construction as planned. While the crisis has so far only had a limited impact on the construction process, Stefan Spilker, Managing Director of Becken Holding GmbH, is aware of changed conditions in sales processes: "With the shutdown, we initially registered greater interest in our advertisements. Due to the hardly foreseeable course of the pandemic, potential buyers then took more time to make their decision. At the same time, we have observed that banks need significantly longer processing times for financing requests from private customers. This has lengthened our sales processes by four to six weeks, which in turn has led to longer reservation times and postponements of notary appointments".

Project development HOCH DER ISAR achieves sales rate of 28 percent

Following the start of sales at the end of 2019, the nationwide project developer Becken has now sold more than a quarter of the apartments, a good two years before completion: "Of the 185 condominiums, which are spread over 13 different buildings, we have sold or reserved 28 percent of the apartments today. All types of apartments are represented, which strengthens our resolve to address the right target groups. The majority of the buyers come from Munich and the surrounding area and have acquired the residential property mainly for their own use," reports Spilker. The sizes of the future condominiums vary from 30 square meters to 330 square meters. The 185 apartments are divided into eleven penthouse apartments, 88 city studios and culture apartments, 72 spacious city apartments, eleven garden apartments and three townhouses. "In sales, we are also noticing that the interest of end consumers, who postponed their decision to buy a condominium at the beginning of the pandemic, is increasing again. We conclude from this that prospective buyers have perceived in the course of the pandemic that residential real estate is a crisis-proof investment," says Spilker. The completion of the ensemble is planned for the turn of the year 2022/ 2023.