First the good news for people looking for a home: On average throughout Germany, residential properties cost 6.3 percent less in the third quarter of this year than in the same period last year. This is shown by current data from the Association of German Pfandbrief Banks (VDP), which evaluates the data from more than 700 German credit institutions on the real estate financing processed there every quarter. Compared to the second quarter of 2023, prices fell by 1.7 percent – slightly more than in the previous quarter. At that time, VDP managing director Jens Tolckmitt spoke of an emerging “sideways movement” in prices.
In the big cities, where a particularly large number of people want to live or have jobs, prices are more stable than in the rest of the country. Compared to the second quarter, they fell by an average of 1.3 percent in the metropolises, the new data shows. Compared to the same quarter last year, home ownership became cheaper, especially in Frankfurt am Main (minus 9.1 percent), while prices in Berlin (minus 4.7 percent) only fell slightly.
The Greix figures published on Thursday, the real estate index of the universities in Cologne and Bonn and the Kiel Institute for the World Economy (IfW), come to a similar result. Compared to the previous quarter, the researchers see a decline of 1.5 percent for condominiums, and even 3.2 percent for single-family homes – slightly more when adjusted for inflation.
“The renewed price decline in the third quarter is absolutely compelling,” says Tobias Just, scientific director of the Irebs Immobilienakademie. Many people need significantly more affordable prices on the real estate market in order to be able to fulfill their desire to own a home. After years in which buyers were able to take on debt for virtually nothing, interest rates on real estate loans have more than quadrupled in the past two years. According to figures from the credit broker Interhyp, the average interest rate for a ten-year loan was just under one percent at the end of 2021. In the meantime, the prospective owners have to prepare for a good four percent.
According to the VDP data, prices for residential properties have lost a total of seven percent since their peak in mid-2022. But that doesn’t offset the increased interest rates. This is a rather sobering starting point for anyone who has to go into debt for their home. “So far, the price declines have not adequately reflected the rise in interest rates,” says real estate expert Just.
Because too little is being built, prices remain relatively stable
Prices are now falling more significantly, but there can still be no question of significant price declines, according to the VDP. This is mainly due to the fact that little is currently being built in Germany – too little. The number of building permits collapsed in the first half of the year. The tight supply keeps purchase prices relatively stable despite increased interest rates. In addition, the lack of living space means that rents are rising and will probably continue to rise, as Just predicts.
So buy it if at all possible? At the moment, as the current Greix data shows, most people on the real estate market prefer to wait: compared to the same period last year, around a third fewer condominiums, single-family and multi-family homes were sold in the third quarter of 2023. Many sellers are apparently not yet ready to say goodbye to their price expectations. At the same time, buyers do not want – or cannot – come to terms with the mix of increased interest rates and prices that continue to be high in many places.
Real estate expert Just assumes that prices could develop in two directions in the future. While the prices for well-renovated and energy-efficient new buildings are likely to remain relatively stable or perhaps even rise again, he expects that buildings with poor energy classes will continue to depreciate. “In my opinion, this asymmetry is more important for investors than the development of an average,” says Just. The conclusion remains: in the real estate market, those people who have a lot of equity, know good craftsmen – or can renovate their house themselves are at an advantage .