
How long will real estate prices continue to rise?
Almost everywhere in Germany—with a few exceptions in structurally weak regions—real estate prices have been moving in only one direction for ten years: up! According to calculations by the Bundesbank, average prices in German cities have more than doubled since 2010. And neither the first lockdown last year nor the current one has been able to significantly slow down the price surge. Although prices stagnated briefly in the middle of last year, they have continued to rise since then, albeit at a slightly slower pace than before.
The situation in the major cities
One reason for this is the continuing high demand and the ongoing shortage of new housing, especially in metropolitan areas. These areas have experienced strong population growth in recent years, partly due to international immigration and partly due to people moving in from surrounding regions. Although the growth is slowing somewhat due to lower immigration during the coronavirus pandemic, this has not yet had any easing effect on the tight housing markets. Owner-occupiers are desperately searching for their own four walls, but investors are also rushing to buy condominiums, apartment buildings, and commercial properties. There is hardly anything more attractive to investors than real estate, as low interest rates mean that there are currently few alternative investment opportunities, while at the same time the low interest rates are ensuring exceptionally favorable financing conditions for real estate purchases.
Trend reversal expected for 2024
However, experts are seeing the first warning signs that the price boom will come to an end within the next few years. A possible trend reversal is forecast for 2024. One possible reason cited is a decline in population, which is expected to be offset by a higher number of new buildings completed by then, thereby reducing the shortage of housing. Analysts also point to a growing risk of inflation, which would lead to a slide in real estate prices as a result of more expensive financing loans.
What does this mean for property owners? Anyone thinking about selling their property in the near future should make a decision soon. That's because there are still windfall gains to be made. As long as interest rates remain low, buyers are willing to pay record prices for real estate in this tense situation. Those looking for a property, on the other hand, are having a hard time, not only because of the sharp rise in prices, which are no longer affordable for many despite good financing conditions, but also because there are hardly any properties on offer at all.
One alternative could be to purchase a property at a foreclosure auction. However, even the number of foreclosures has fallen recently, despite the coronavirus pandemic.
Would you like to seize the opportunity and sell your property now? Contact us! We will be happy to advise you and support you in marketing your property in the best possible way.
Further information can be found here:
- Spiegel: Rising interest rates – the big real estate gamble
- Spiegel: End of the real estate boom in 2024
- Spiegel: Number of foreclosures falls despite coronavirus
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.
photo: © Vantus/Depositphotos.com