Wiesbaden
For the first time in two years, houses and apartments in Germany are becoming more expensive again. According to new figures from the Federal Statistical Office, prices are stabilizing after last year’s historic plunge. Housing in particular is in demand again in many places. Banks expect property buyers to brace for another rise in prices.
Residential property prices fell by an average of 2.6 percent in the second quarter compared to the same period last year, Wiesbaden statisticians said. However, prices rose by 1.3 percent compared to the previous quarter. “This is the first quarter-on-quarter increase since the second quarter of 2022.”
Martin Güth, economist at Landesbank Baden-Württemberg (LBBW), said the price decline is likely to end after the summer of 2022. “The increase in sales on the real estate market indicates that we are currently experiencing price stabilization that will last,” he said. Mortgage rates have fallen noticeably recently. “With this tailwind, the market recovery will continue in the second half of the year.”
Housing Rising Trend
According to statistics, only rural areas with low population density showed a decrease in apartment prices compared to the first quarter. Single-family and two-family homes saw an average increase in prices in all regions compared to the previous quarter.
In the seven major cities of Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, and Düsseldorf, housing prices rose by 1.6% (apartments) and 2.3% (single-family and two-family homes) compared to the previous quarter. Compared to the same quarter last year, apartments were 1.5% cheaper and houses were 4% cheaper.
The situation is similar outside of major cities. In other major cities, apartment prices rose 1.4% from the previous quarter, while prices fell slightly 0.1% year-on-year. Single-family and two-family home prices rose 1.3% from the previous quarter, but were 4.9% lower than the same period last year.
High price discounts for homes with poor energy performance
The signs of the housing crisis are most evident in rural areas with small populations, where buyers paid 0.9 percent more for one- and two-family homes than in the previous quarter, but 5 percent less than in the same period last year. Apartment prices fell 3 percent from the previous quarter and 6.5 percent from the same quarter last year.
However, the data is average figures. The price gap between energy-efficient buildings and energy-consuming properties is huge. Houses with old oil or gas heating systems and low energy ratings lose a lot of value, while properties with the latest technology sell for much higher prices.
Construction interest rates have fallen noticeably.
According to the Federal Statistical Office, residential property prices will fall by 8.5% in 2023. The Kiel Institute for World Economics (IfW) says this is the biggest decline in nearly 60 years, even after a historic boom. In the first quarter, property prices fell by 5.7% compared to the same period last year.
The biggest reason for the end of the boom was the rise in interest rates. Many people could no longer afford their walls, and sellers had to lower their prices.
However, property prices have recently improved somewhat again and there are increasing signs that the property crisis is coming to an end. Building interest rates have fallen significantly, as an indirect consequence of the European Central Bank’s interest rate cut. According to FMH Finanzberatung, the average interest rate on a 10-year property loan is around 3.3%. Twelve months ago it was less than 4%.
Consumers are turning to real estate lending again
According to ECB data, consumers requested more property loans in July than in the previous two years. The shortage of living space and the high demand for it have not changed at all. Building permits collapsed again in July.
The Hamburg Gewos Institute expects a significant increase in the number of real estate sales and purchases this year. Commerzbank expects a slight increase in real estate prices, but no new boom is in sight. For that to happen, building interest rates must fall sharply. However, financial markets have long been accustomed to the ECB’s key rate cuts.
LBBW economist Güth says residential property is still somewhat attractive as an investment. “But if you’re looking for a property to use, there’s no reason to wait any longer. In our view, neither prices nor mortgage rates will fall significantly this year or next.” But when the game is over, no one should panic. “All properties should be inspected well, and potential buyers are still in a good negotiating position.”
notification: This report is part of an automated service of the German Press Agency (dpa), which operates under strict journalistic regulations. The AZ Online editorial team does not edit or check it. Please send questions or comments to Feedback@az-muenchen.de.
