
Will real estate prices fall in 2022?
According to the Federal Statistical Office, the rise in purchase prices for houses and apartments accelerated again last year. In the third quarter of 2021, prices were twelve percent higher than in the same period in 2020. This was the highest increase ever recorded since data collection began in 2000.
Signs of a trend reversal
however, economists see initial signs of a trend reversal in rents, for example. In particularly tight major cities, rents appear to have reached an upper limit. In 23 of the 50 most expensive cities in Germany, rents for new contracts are expected to have fallen slightly in the third quarter of 2021 compared to the second quarter. This was the result of a study by F+B, a consulting and analysis firm specializing in the real estate market.
Signs of vacancy
For the first time in 14 years, the vacancy rate is rising, albeit slightly. This is shown by the vacancy index of the research and consulting institute Empirica. However, Empirica CEO Dr. Reiner Braun emphasizes that "the problem of housing shortages in the so-called 'swarm cities' has not yet been solved." This is still particularly noticeable for apartment seekers in many tight rental markets in the lower price segment.
Reasons for the trend reversal
Real estate experts see several reasons for the current development. On the one hand, immigration to metropolitan areas is declining. At the same time, the weak economy is limiting disposable income. In addition, stricter laws and regulations are slowing down rent increases in many regions. However, new housing construction is not yet expected to have an impact on price developments. Real estate experts point out that it can take years for new construction to have an effect on rents and prices.
They also emphasize that the high price level of new buildings provides little relief for lower and middle income groups. Michael Voigtländer, head of the Financial Markets and Real Estate Markets division at the German Economic Institute, says that nominal rent reductions in urban centers are utopian. He believes it is more likely that a prolonged period of stagnant rents combined with rising incomes would ease the burden on tenants.
Is there a threat of a real estate bubble?
Some experts see a problem in the fact that rent trends and low interest rates can no longer be the sole cause of current housing prices in some cities and market segments. According to the experts, speculative bubbles have formed in Berlin, Munich, Hamburg, and other large cities. Some prices are said to be up to 30 percent above their value.
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Notes
For reasons of better readability, the generic masculine form is used in this text. Female and other gender identities are expressly included insofar as this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please have the facts of your specific case clarified by a lawyer and/or tax advisor.
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