Real estate prices have been rising for years. But since interest rates on building loans have been rising, houses and apartments have become unaffordable for many. Falling demand pushes prices down. How prospective buyers should react.
The negative trend in real estate prices continued between July and September, as determined by real estate platform McMakler. In a study, the real estate professionals recently named the current real estate trends in the third quarter of 2022.
The findings are clear: in Germany as a whole, real estate prices fell by an average of 0.3 percent between July and September. The ranking of the federal states looks like this:
A comparison of the so-called A cities shows a continued decline in purchase prices in all top locations. In a quarterly comparison, Stuttgart in particular shows the highest price decline of 1.6 percent with square meter prices of 5776 euros. Also above average:
According to McMakler Research, the real estate supply in Germany increased in the third quarter of 2022. At the federal state level, the strongest increase was in Bavaria with 25.1 percent, ahead of Hamburg (24.1 percent) and North Rhine-Westphalia (23.4 percent).
At the same time, buyer demand fell nationwide in the third quarter by an average of nine percent. All of the data mentioned is based on the inquiries and transactions at McMakler.
The AVIV Housing Market Report for the third quarter comes to very similar conclusions. Here, too, the result is: real estate prices in Germany are falling. According to this study, the highest price declines were recorded by:
Dresden is an exception among German metropolitan areas, with prices recently rising by 3.3 percent.
The authors of this analysis also expect financing interest rates to continue to rise. The reason: The high inflation of 9.1 percent in the euro zone and 10.0 percent in Germany is forcing the European Central Bank (ECB) to continue raising interest rates. The authors emphasize that the interest rate for real estate loans is not linked to the key ECB interest rate. Interest rate hikes by the EU monetary authorities would have a signal effect on the development of construction interest rates. If they rise, it will depress purchase prices.
A recently published study by the major Swiss bank UBS even warns of real estate bubbles in Frankfurt/Main and Munich. Nowhere in the EU is the risk of a massive collapse in real estate prices as high as in the two German metropolises. This is due to the constant new price records over the past few years – caused by the historically low interest rates for mortgage lending. But this trend has long since reversed.
In January 2022, there was a ten-year mortgage at about 1 percent. Customers currently have to pay almost four percent. This makes buying real estate unaffordable for many.
However, by no means all experts agree that the trend towards falling real estate prices will continue unabated. “Anyone who claims to know how real estate prices will continue is lying,” quotes the “Süddeutsche Zeitung” from Reiner Braun, head of the consulting firm Empirica. According to Braun, the market is currently experiencing two opposite developments: Rising interest rates are depressing prices the growing shortage of living space rather speaks for rising prices.From Braun’s point of view, it is currently unclear which trend will have a greater impact on future price developments.
Michael Neumann, CEO of the real estate financier Dr. Klein comes to a different conclusion on this issue. “Real estate prices will continue to rise in 2022,” he explains. The reason is the lack of housing.
Should real estate prices actually rise again in the medium term, everyone who is now hesitating with their purchase decision would have made two mistakes: They will probably have to pay higher interest for building loans in the future – and also be prepared for higher purchase prices.
The reform for the new property tax is complex – and this year it will require owners. You have to submit some data to the tax office. You have to be very precise and observe special deadlines. In our large guide you will find all the information you need to know in a compact form.
