Text: Matti Schenk

Having a roof over our heads is one of our basic existential needs. Residential real estate offers us exactly that and is therefore a non-substitutable good. Therefore, it is considered to be relatively safe by investors. This security is manifested in relatively stable rental income. For instance, statistically speaking since 1976, average rents for existing apartments in West German A-cities have fluctuated only about half as much as office rents in the same cities.  Even during the COVID-19 pandemic and the envisaged recession, residential rents are expected to remain relatively stable.

In times of crisis, risk mitigation is the top priority for many investors. This quest for security has resulted in yields on low-risk investments, such as government bonds of countries with strong credit ratings, falling to an all-time low. The ECB's purchase programme, with an additional volume of around €750bn, will not only keep securities yields low, it will also crowd out private investors. These in turn will be obliged to look for alternatives, which is likely to further increase the investment pressure on the real estate market (see: There is less than ever a way around the real estate asset class – above all in Germany). As residential real estate is particularly stable in terms of revenue compared with other types of real estate, it is likely to benefit particularly from these circumstances and from investors' high risk aversion. The character of residential real estate - low fluctuation of income, but also little chance of short-term increases in value - also speaks for longer-term investor commitment.

In addition, the COVID-19 pandemic and its side effects could even strengthen the status of housing as an existential, non-substitutable commodity. The lockdown experience could result in homes becoming increasingly important in people's lives and, together with other effects such as the increasing acceptance of working from home, could lead to a higher demand for living space (see: More space, less costs, and far greener: revitalizing city outskirts). As such effects become apparent, this would make the housing sector even more attractive for investors.