Prices rise slightly: Study: Interest in buying real estate is increasing again

Prices rise slightly
Study: Interest in buying real estate is increasing again

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Last year, real estate prices in Germany fell at a record pace. Now, according to a study, falling interest rates are causing increasing demand for home ownership. Experts expect prices to rise. Rents should also increase.

Thanks to falling interest rates, interest in buying real estate in Germany is increasing again, according to a study. In four out of eight metropolises, the asking prices are already above the previous year’s level, said the real estate platform ImmoScout24. “Compared to the previous year, interest in purchasing property has increased significantly – in the metropolises by as much as 49 percent,” explained managing director Gesa Crockford.

The supply surplus on the purchasing market is reducing. “We therefore assume that purchase prices will increase in the future.” ImmoScout24 speaks of signals for a turnaround in the real estate market. After years of booming, the prices for residential property in Germany fell at a record pace of an average of 8.4 percent in 2023 due to weak demand. In the first quarter of 2024, the Germany-wide average asking prices for existing apartments for sale rose by 0.6 percent compared to the previous quarter to 2,490 euros per square meter, according to ImmoScout24.

However, the prices are still 2.5 percent below the value a year ago. However, price pressure is likely to increase somewhat if the European Central Bank (ECB) lowers interest rates again from the middle of the year, as is generally expected. Because then more interested parties could afford to buy an apartment or house, said Immoscout24 expert Kristian Kehlert. The building interest rates, which would have settled between 3.5 and four percent, could then possibly fall below three percent. However, the interest rate is unlikely to fall much more, as much of the expected easing of the ECB’s interest rate policy has already been priced into the financial market.

The average rent in Munich is twice as high

The analysis shows weaker price dynamics on the rental market, but still high demand pressure, it was said. “Rental prices will continue to rise,” said Kehlert. “Not enough is being built.” The gap between rental and purchase prices is likely to continue to close, after purchase prices have been “developing ahead” of rental prices for many years. On average, existing apartments were offered for new rentals at the beginning of the year 1.7 percent more expensive than in the previous quarter.

According to the information, the price development for new apartments was plus 1.6 percent. This means that the basic rent for a two-room apartment with 70 square meters in existing buildings is 599 euros on a national average and 833 euros for new buildings. Munich remains by far the most expensive place in Germany: Here, such a two-room apartment costs 1,433 euros per month, and in a new building it even costs 1,745 euros. While the price per square meter for a rental apartment in a new building nationwide was an average of 11.90 (existing: 8.56) euros at the beginning of 2024, in the Bavarian capital it was a good double at 24.93 (existing: 20.47) euros.

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