It is the news that many people looking for a home have been waiting for for a long time: After years of rapid price increases, houses and apartments are no longer becoming more expensive in many places. According to data from the credit broker Interhyp, prices in the second quarter fell slightly by almost one percent compared to the first three months. CEO Jörg Utecht spoke of “price corrections and stagnation”. Compared to the first half of 2021, however, home ownership has become an average of eleven percent more expensive – mainly because demand was still booming at the beginning of the year.
The break was particularly pronounced in Munich, Cologne and Leipzig, it said: in these cities, private houses and condominiums were even slightly cheaper at the end of June than a year earlier. The price decline was strongest in Cologne with a minus of almost eight percent.
Higher interest rates, rising costs and fewer new buildings
For several months there have been increasing signs that the boom in the housing market could be over. Interest rates for real estate loans have risen significantly since the beginning of the year. Even if they have given way again recently, a loan with a three-year fixed interest rate is currently almost three times as expensive as in January. That is also the main reason for stagnating or falling prices, according to Utecht: Some prospective buyers could simply no longer afford their own home.
There are different forecasts of how far and how long prices will fall. Not only have interest rates risen, building has also become enormously expensive because there is a lack of both materials and skilled workers. Most recently, the federal government has largely reduced funding from the state bank KfW, and in the coming years the focus will now be on energy-related renovations and much less money will be given out for new buildings. The number of newly built apartments fell last year, and recently fewer new building applications were submitted.
The supply of new houses and apartments is therefore likely to grow much more slowly in the coming years. That drives up prices, “just like the high inflation and the environment that tends to be borrower-friendly,” according to a recently published report Analysis of Deutsche Bank. “So there are good reasons why prices could stabilize and rise again in the coming months,” writes economist Jochen Mörbert. And even if it continues to go down more and more, it will only be temporary – prices are likely to rise again soon. So if you are looking for a house or an apartment, things are likely to remain complicated.