The market development of the last months - here is an overview with facts and figures.

As expected, the demand for furnished apartments in Munich has declined since the end of March. Demand fell by 20% in April and May. Many prospective tenants were also reluctant to rent temporary apartments or could not make a decision due to entry restrictions. There was an increasing number of project cancellations or premature terminations of stays in Munich due to job changes. The topic of working from home also played a role, albeit a lesser one. Tenants who work from home for Munich-based companies or organizations from other regions canceled their apartments in Munich. The combination of lower demand and higher levels of relocation reflects the development of offers in our company and on the Immoscout portal:

Development of the Mr. Lodge offer compared to the previous year:

• 1-room apartments: +170%
• 2-room apartments: +35%
• 3-room apartments: +65%
• 4-room apartments: +/-0%
• Houses: +/-0%

Development on Immoscout24:

Looking at the offers on Immoscout24, the current picture is as follows:

In the category rental apartments:

• Offers mid-March: approx. 1,450
• Offers mid-June: approx. 2,250
• 55% increase

In the temporary housing section:      

• Offers mid-March: approx. 1,020
• Offers mid-June: approx. 1,350
• 32% increase

Gradual decrease in rental prices

The sharp rise in supply has lead to an increase in the amount of rental price reductions. Experience shows that change to the market, in particular rental price reductions, is a slow process and one that is not yet complete. Important events such as trade fairs, congresses, specialist meetings and the Oktoberfest will not take place this year which will continue to reduce the occupancy rates for hotels and boarding houses over the coming months. They are competing with their offers especially in the 1-room apartment segment, which also explains the drastic increase in offers in this area. In addition, there is a lack of job starters, students and interns.

Outlook: Demand slowly picking up again

The opening of borders with most EU countries will have a positive impact. We therefore expect demand to pick up in the coming months, which is already becoming apparent this month. Students may not come to Munich in the winter semester as usual and will generally be more reluctant to rent apartments, as it has become more difficult for many students to find additional employment. In addition, the coming semester will probably also see students studying almost exclusively online.

The companies and organizations based in Munich will provide fewer new jobs compared to the previous year and will be able to fill them more with local applicants who will be able to carry out their work from their home office. There will not be a relevant influx of specialists or expats from important countries such as the USA, Japan, China and India until August/September. Quite a few landlords will have to adjust to declining returns, which will be accompanied by persistently low credit interest rates.

Your contact persons in landlord advisory:

Lisa Hessner | Steven Meyer | Kirsten Mahdi | Veronika Schimon
Dietmar Schlüter | Norbert Verbücheln

T.: 089 340 823-44 | E-Mail: vermieterberatung@mrlodge.de
Mr. Lodge GmbH | Landlord advisory | Prinz-Ludwig-Str. 7 | 80333 Munich

From 1 July, new conditions apply to the brokerage of rental apartments due to the reduction in VAT:

The date of service is decisive for the VAT rate.

The government has decided on a new regulation of commissions for brokering sales of apartments and houses. For houses, the new regulation only applies to townhouses, semi-detached houses and single-family houses, i.e. not to multi-family houses. In future, the commission will generally be shared between the seller and buyer. It can be assumed that the following model will prevail in Munich: Seller and buyer each pay 1.5 to 2% of the agency commission (plus VAT).

Real estate owners who wish to benefit from the previous arrangement (commission paid by the buyer) should initiate the sale in the coming weeks.

Mr. Lodge was able to increase sales by 25% in the first half of the year. This positive picture was clouded slightly by the difficulties arising from the Corona crisis. Viewing appointments, particularly in occupied sales properties, were and are significantly more difficult. The banks are more critical when it comes to financing requests and require longer processing times, partly due to lack of staff in the credit departments.

Sales processes for apartments with owners living abroad were significantly more demanding. This is where Mr. Lodge can benefit from a high degree of additional expertise in cooperation with owners in Europe, the USA and Asia.

In principle, however, it can be said that excellent prices are still being achieved. The perfect presentation of sales properties through the use of photos in Mr. Lodge prime quality as well as 360°and 3D tours (when possible) is an additional effective tool, especially during the pandemic. In addition, our interior design department improves the overall look of the sales properties through (free) homestaging.

Real estate owners who are currently considering selling should not hesitate and take advantage of the favorable sales conditions.

In the city of Munich, building permits continued to decrease in the first four months of 2020. In contrast, most of the administrative districts were able to approve more apartments. A weakening of the number of permits is expected for the remaining months, as builders and developers are more cautious and approval processes take longer.

Time period 01.01. to 30.04.2020 in detail:
(Change compared to the same period of the previous year)

Source: Bavarian State Office for Statistics

In January and February, the population of Munich increased by a total of 1,733 people. In the months of March and April there was a slight statistical decrease: As of 30.04.2020: 1,561,508 persons.

According to the brokerage houses BNP Parisbas, JLL and Savills, rentals fell by a moderate 4.8 to 8% (depending on the assessment) in the 1st quarter. The effects of the crisis will not become apparent until the 2nd quarter. The market is expected to decline sharply.

The Munich labor market has been feeling the effects of the crisis since April. Unemployment rose by 53% year-on-year to 51,737 in May, and there was also a sharp increase in short-time work. The number of registered jobs fell by 36% to 8,254.

Source: Federal Employment Agency Munich

Prospective property buyers with financing needs continue to benefit from the central banks' low interest rate policy. The current best values from June 2020 (effective interest rate). The values refer to a 50% mortgage at € 400,000 purchase price and 2% redemption and serves as an orientation.
  (Source: Interhyp - www.interhyp.de).