Residential real estate will become more expensive by a further 12 percent

Dhe prices for German residential real estate increased sharply again in the first three months of this year. From January to March, they increased by an average of 12 percent compared to the previous year, as the Federal Statistical Office announced on Friday. “This means that the rate of increase in the house price index was over 10 percent for the fourth time in a row,” it said. At the end of 2021, the increase was 12.2 percent.

Compared to the previous quarter, however, apartments and detached and semi-detached houses only rose by 0.8 percent. “This indicates a slight weakening of the momentum,” according to the statisticians. In the third quarter of 2021, prices had risen by 4.1 percent and by 3.1 percent in the fourth quarter.

The Bundesbank has long been warning of increasing dangers on the German real estate market in view of rising prices. Because of the sharp increase Interest charges however, a trend reversal is slowly emerging. The demand for real estate for sale in the first quarter of 2022 fell by 17 percent within a year, as the online portal Immoscout24 recently determined. Experts at Landesbank LBBW expect a price correction above all if interest rates continue to rise sharply while the economy is not making any headway. Then price drops of 20 to 25 percent are possible.

Advertisements for residential properties for sale are now online longer than in the previous year, as it is more difficult for sellers to find buyers. Instead, significantly more people are looking for properties to rent again.

“These developments could have a dampening effect on price developments in the medium term,” said ImmoScout24 Managing Director Gesa Crockford. Additional costs for buyers due to higher interest rates could at least be cushioned somewhat. Despite the slowdown, however, demand for real estate is still well above the level at the end of 2019 and thus before the Corona crisis.

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