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Falling purchase prices, postponed projects: Real estate experts explain what tenants can expect now

2022-12-07T04:04:40.922Z


Falling purchase prices, postponed projects: Real estate experts explain what tenants can expect now Created: 2022-12-07 04:56 By: Corinna Maier Aerial perspective of Marienplatz in Munich. © Dmitry Rukhlenko/Imago Stephan Kippes has known the Bavarian real estate market for decades like no other. In an interview, he explains what tenants can expect in the future. Munich – Something unusual i


Falling purchase prices, postponed projects: Real estate experts explain what tenants can expect now

Created: 2022-12-07 04:56

By: Corinna Maier

Aerial perspective of Marienplatz in Munich.

© Dmitry Rukhlenko/Imago

Stephan Kippes has known the Bavarian real estate market for decades like no other.

In an interview, he explains what tenants can expect in the future.

Munich – Something unusual is currently happening on the Bavarian real estate market: sales are falling, projects are being postponed, purchase prices are falling.

Inflation and uncertainty in the wake of the Ukraine war have left their mark.

What does this mean for prospective buyers?

builders?

investors?

homeowner?

What's next for the real estate market in the Munich metropolitan region with its extensive commuter belt?

We spoke to a whole range of experts about this for our new series.

Real estate expert speaks about impact of higher interest rates

Stephan Kippes has known the Bavarian real estate market for decades like no other.

His association, the Real Estate Association South (ivd), puts together a major market report several times a year.

There hasn't been a result like this for a long time: sales in the real estate business have collapsed.

ivd boss Kippes explains why, in his opinion, this is the case.

Real estate sales in Bavaria have collapsed by 11 percent in the past six months.

Why is that?

Kippes: The main reason is the significantly higher interest rates.

The financing of owner-occupiers is often sewn on the edge, so even small differences make a big difference.

Because they add up to large amounts.

How large?

Kippes: Just nine months ago, ten-year mortgage rates were 0.80 percent.

Today it is well over three percent, often over four percent.

If we take a financing of 350,000 euros - and that's not much in Munich - and compare the interest rate of 0.8 percent with 3.6 percent now, then a buyer today has to pay 815 euros more every month than at the lowest interest rates.

Does that mean that sales are collapsing because construction projects do not come about because financing is too expensive?

Kippes: Yes, property developer sales fell, but that's not all.

Existing properties are also sold less frequently.

For this, too, most interested parties would have to take out a loan at much higher interest rates.

Are houses and apartments getting cheaper now?

Kippes: At least the days of rising prices are over, at least in the medium term, that's for sure.

In some areas there are already price reductions.

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On what scale?

Kippes: That's not huge, it's around half a percent in Munich.

But we are used to completely different upward dimensions here, so the decline is considerable.

You also have to include inflation, which was more than ten percent recently.

The real estate prices are not adjusted for inflation.

You have to take that into account mentally.

The building ground price for multi-storey buildings is also interesting, i.e. the preliminary product for the property developer.

Since the prices in Munich have fallen by 1.2 percent.

Doesn't sound like much either.

Kippes: Such building plots used to be auctioned off.

Every developer has tried to get such a property.

Today there are plots of land that hardly anyone raises their finger at.

What about the rents?

Kippes: One could intuitively think that if purchase prices fall, rents will fall too.

But it is not like that.

Because people who would otherwise have hit the market now prefer to rent.

These are people who are not badly positioned financially, but who are no longer able to earn their own living in view of the jump in interest rates.

That is why they are now competing with the classic rental market clientele.

This means that we have further increases in rents, but not as much as in previous years.

The RWI Leibniz Institute recently calculated that, taking demographic developments into account, houses will be 18 percent cheaper and rents 15 percent cheaper in 2050.

Real estate expert: In Munich, 54 percent of all households are now single-person households

Do you think that is realistic in Upper Bavaria?

Kippes: It's possible that prices will drop noticeably here as well from time to time.

After the sharp increases, that would not be an unhealthy development.

One thing speaks against falling prices in the long term: influx.

A stable population growth of 0.71 percent is forecast for Munich by 2040.

Each year.

That's the magic number for a market researcher.

On the other hand, we have an apparently unstoppable trend towards ever lower occupancy rates.

Do you mean that more and more square meters are being inhabited per capita?

Kippes: Exactly.

In Munich, 54 percent of all households are now single-person households.

That means a huge consumption of living space.

This combination of influx and more and more square meters is preventing prices from falling in Munich over the long term.

How could this be broken?

Kippes: Our structural policy is where we should start.

In Bavaria we have metropolitan regions that suffer from a housing shortage, but we also have municipalities where mayors fight for every resident.

How do you change that?

Kippes: The fact is that many rural areas are somewhat left behind in terms of infrastructure.

When the train no longer stops in communities, there is no longer a bank, post office or bakery, secondary schools close and then the last local inn closes, then for many that is the signal to leave.

And many are moving towards Munich.

Not at all because Munich is so beautiful - although of course it is - but because they simply follow the infrastructure and the jobs.

Especially during the pandemic, we would have had the chance to do something good for these communities and to relieve Munich.

Home office would have and has made a lot possible.

Provided there is decent internet.

Kippes: Exactly.

Nobody can work from home if the internet is shaky.

I stand by it: If you want to solve the problems in Munich and the surrounding area, you finally have to make a more committed structural policy.

Second part of the real estate series:

Tips from the interest rate expert: This is how your property pays off

Interview: Corinna Maier

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Source: merkur

All news articles on 2022-12-07

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