According to a study, the slump on the German real estate market will continue in the current year. Experts expect fewer sales transactions than at any time since 1995.
After the slump last year, there is no improvement in sight on the German real estate market in 2023 either. According to a study, the market is likely to decline even more this year. Based on the transactions registered in the first half of the year, the Hamburg Gewos Institute only expects around 591,800 purchase cases.
A quarter fewer real estate deals than in 2022
That would be almost a quarter fewer deals than in the already weak year 2022 – and the lowest value since the all-German time series began in 1995. Nationwide, sales will therefore fall by almost 30 percent to around 198 billion euros. The institute announced that sales and case numbers were the largest declines ever measured.
According to the survey, in 2022 real estate sales collapsed to 279.4 billion euros – a decline of 17.2 percent compared to the record year 2021 and the abrupt end of a long-term boom. The number of transaction cases fell by 16.1 percent to 787,700.
rise in interest rates property buyers to accomplish
In the current year, the consequences of the rise in interest rates are now becoming more noticeable than in 2022, explained Gewos expert Sebastian Wunsch. The moderate decline in purchase prices so far cannot come close to compensating for the increase in financing costs. Rising financing costs and high inflation are reducing purchasing power – making buying property more and more difficult for owner-occupiers. For investors, on the other hand, it is primarily uncertainty that makes them hesitate.
“The current market situation continues to be characterized by a pronounced reluctance to buy,” emphasized Wunsch. “We currently do not see any significant changes in the market-determining factors for the rest of the year.” The inflation rate is far away from the central banks’ targets, so no relief in interest rates is to be expected in the medium term. Purchase prices are expected to stabilize at the end of the year because they are currently falling more slowly.
What’s next with building interest?
What will happen next with mortgage interest rates will be decided today in Frankfurt. At their council meeting, the monetary authorities of the European Central Bank (ECB) set the key interest rates. These have a direct influence on returns on the bond market. This in turn has consequences for home buyers, as building interest rates in Germany depend heavily on the yield on the ten-year federal bond. A pause in interest rates by the ECB or even an end to the cycle of interest rate hikes could help revive the real estate market.