New property prices have risen steadily over the past few years. According to a study, the cost explosion could soon come to an end. However, this does not necessarily mean that many more people will be able to afford to own their own home.
The turnaround in interest rates is likely to cause prices to fall on the German real estate market for the first time in twelve years. According to an analysis by DZ Bank, purchase prices for residential real estate are expected to fall by four to six percent on average in 2023. But that doesn't mean buying a home is going to be any easier. "Possibly still rising mortgage interest rates are causing concern for prospective buyers with little equity and are one reason why the completion of planned construction projects is being delayed."
"The favorable conditions for the real estate market have evaporated and ended the upward trend in prices that began in 2010," says the study. "The real estate boom had reached its zenith anyway, but the end came abruptly with the Ukraine war." Since the beginning of the year, interest rates on real estate loans have quadrupled to four percent. This is the end of the sharp rise in prices for residential real estate. Above all, prospective buyers with little equity can hardly afford the loan installments. In the third quarter of 2022, the prices of apartment buildings initially began to fall. "In the case of residential property, the price decline is likely to start somewhat later in the fourth quarter."
But not only financing and heating, but also the construction of residential property has become noticeably more expensive. At the same time, the tense housing markets would have to cope with a rapidly increasing immigration - above all by refugees from the war zone in Ukraine.
Due to rising interest rates and high material costs, the number of building permits for new apartments in Germany recently collapsed in September. It was the fifth decline in a row and noticeable at 9.1 percent. The construction industry is talking about a wave of cancellations. "The government's already demanding new building target of 400,000 apartments per year, including 100,000 social housing units, must be rated as utopian in view of the sharp rise in construction and financing costs," explained the authors of the study. The number of completions could fall towards only 200,000 new apartments by 2024.