“Price boom is over”
Federal institute predicts falling house prices
4/22/2022, 7:19 p.m
Finding an apartment in a big city like Berlin or Munich is not easy, finding a cheap apartment is all the more difficult. According to the Federal Institute for Research on Building, Urban Affairs and Spatial Development, prices could soon fall.
After more than a decade, the trend towards rising house prices in Germany’s metropolises and large cities could be reversed. The Federal Institute for Building, Urban and Spatial Research speaks of “significantly stagnating elements”. “The boom with ever-increasing prices for rented and owner-occupied apartments in the cities is over,” said department head Matthias Waltersbacher to the “Spiegel” according to a preliminary report on Friday.
People are simply no longer willing and, above all, unable to pay even more money for housing. With Corona, the Ukraine war and rising energy costs, “quite a lot has come together” in the past two years: “Purses are getting tighter, the ancillary costs are rising again significantly.” As a result, there is less demand when rents are high, prices would fall.
An expert from Deutsche Bank Research also expects the price increase to end soon, possibly as early as 2024. The reason also lies in the fact that professional investors will again increasingly rely on bonds instead of real estate when interest rates are higher in the future – fueled by inflation.
“The moment bonds start yielding attractive returns again, demand for residential real estate could collapse practically overnight,” writes economist Jochen Möbert in a study for the bank’s research department, according to “Spiegel”. He doesn’t expect a “massive correction”, but at least a restrained price decline.