As of: February 28, 2024, 4:15 p.m
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A shell: Real estate prices in Germany are probably falling less sharply than expected.
© Rolf Vennenbernd / dpa
According to some experts, property prices in this country will fall less sharply than expected.
The lack of affordable housing will continue in the coming years.
Berlin - According to experts, German real estate prices will fall less this year than previously assumed.
They are expected to fall by an average of 1.7 percent, according to a quarterly survey of 14 real estate analysts by the Reuters news agency published on Wednesday.
A decline of 2.8 percent was still expected in November.
For comparison: Last year prices fell by 8.7 percent.
An increase of 3.0 percent is now expected for 2025.
This is significantly more than the last forecast of 1.8 percent.
“In general, we expect a longer phase of bottom formation,” said ING chief economist Carsten Brzeski.
“The tense situation in the construction sector, with labor and material costs still high, is likely to lead to a shortage of supply, which is likely to put upward pressure on prices.”
German real estate market lagging behind internationally
Increased interest rates in response to high inflation have ended a nearly decade-long housing boom in Europe's largest economy.
During the corona pandemic, prices shot up by more than 24 percent - also because many people were looking for larger living space.
However, average house prices have now fallen by around eleven percent since their peak in the second quarter of 2022.
The German real estate market is in weaker shape than that in many other countries, including the USA.
House prices there have increased much more sharply during the pandemic and, after a brief decline, have started to rise again - despite a similarly sharp increase in interest rates.
Several German property developers had to file for bankruptcy, which further exacerbated the problem of the already scarce supply of affordable housing in this country.
Analysts expect the housing shortage to continue to increase
Twelve of the 14 analysts surveyed expect that affordable housing will remain scarce in the next two to three years.
“The gap between supply and demand will probably widen,” said Sören Gröbel from real estate consultancy JLL.
“There are several schemes in the new build sector that are trying to subsidize affordable housing and will result in an increase in supply, but this will be quite small.”
Eleven of the 14 respondents expect affordability for first-time buyers to improve in the coming year.
At the same time, however, they expect the ratio of home ownership to renters to decline.
“With interest rates at higher levels and affordability showing little improvement, it is hard to imagine home ownership rates rising,” said ING expert Brzeski.
(Reuters, lf)