On this day in history, November 21st, Reuters reports that: According to a Reuters survey of property market experts, German home prices are expected to decrease by 3.5% next year due to the impact of the cost of the living problem and rising borrowing rates on consumers. However, the likelihood of a complete market collapse is low.
While the European Central Bank has been raising interest rates at a time when the union is likely going into recession, the harmonized consumer price inflation in Europe’s largest economy was 11.6% last month.
The average German home price would drop 3.5% in 2023, according to a survey conducted between November 8 and 18, marking a significant reversal from August’s poll, which anticipated a 0.5% gain. Prices will drop 0.5% in 2024 and climb 1.0% the following year.
In contrast, eleven out of twelfth respondents rated the likelihood of a market meltdown in the next year as low, while a twelfth rated it as very low. No one else noticed the high.
According to ING’s Carsten Brzeski: “Weakening demand for home loans and diminishing purchasing power of consumers imply the downturn in the residential real estate market has already begun; nonetheless, we foresee a large price correction rather than a true crash in house prices.”
And yet, when asked how much prices would decline from peak to trough, the median estimate was 10%, with the greatest loss being 17.5%.
Mortgage broker Interhyp’s Jörg Utecht remarked, “Compared with current values, 10% less is fairly reasonable” after Q1 2022’s “extremely large gains” compared to Q1 2021.
After rising by almost 10% in 2017 and an expected 3.0% in 2018, the survey indicated that even a 20% decrease from peak to trough wouldn’t be enough to make the home affordable.
The median response was a 7 on a scale from 1 to 10, with 1 being the cheapest and 10 the most costly, indicating that many first-time buyers and those seeking to upgrade will be unable to afford a home in the foreseeable future.
