Frankfurt/Main
According to the Hamburg Gewos Institute, the German real estate market is likely to recover after the crisis in 2023. Why it matters: Lower purchase prices, slightly lower loan rates and rising wages are making living space more affordable for owner-occupiers again, according to a new forecast from the Gewos Institute for Urban, Regional and Housing Research.
In recent months, the number of purchases on the real estate market has increased. This trend, although very modest, is likely to continue throughout the year. “In the medium term, transactions, monetary turnover and purchase prices will not return to pre-crisis levels,” he says, referring to Germany’s one-year real estate boom that ended in 2022 as lending rates rose sharply.
Meanwhile, not only property prices but also building interest rates have fallen again significantly. According to FMH Financial Advice, the average interest rate on a 10-year property loan was 3.3% recently, compared with less than 4% a year 12 months ago. At the same time, despite the inflationary wave, many people have seen significant wage increases as unions push for high levels of collective bargaining.
Demand for real estate is on the rise again
Specifically, Gewos expects residential property sales to increase by around 11% this year, to over €172 billion (2023: €155.7 billion). The number of purchases is also expected to increase by around 11%, to 545,000. While owner-occupiers benefited from better economic conditions, real estate investment remained unattractive for investors. Despite rising rents, the yield gap remains narrow compared to less risky forms of investment, says Sebastian Wunsch, head of real estate analysis at Gewos.
No improvement in housing construction
Gewos believes the housing crisis is not improving. “The current figures from the rating committee indicate that land sales for residential buildings have declined further this year, especially for owner-occupied properties,” Wunsch said.
Last year, the German real estate market fell into a deep crisis. According to Gewos, sales of residential land, multi-family housing and commercial real estate fell particularly sharply, while the homeownership sector remained the most stable.
In 2023, the total sales of the real estate market amounted to around 202.4 billion euros, which is almost 28% less than the previous year. The number of transactions fell to a record low of around 666,700 (-15.2%). For the study, Gewos analyzed national data on real estate purchase contracts and related sales concluded with professional commissions.
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