The real estate market is rebuilding

The big portals for real estate offers notice it first: the real estate boom is now slowly coming to an end. In major cities, purchase prices are stagnating or already falling. The buying mood in metropolises like Düsseldorf, Frankfurt am Main and Hamburg is declining drastically.

The high inflation in Germany is having an increasingly strong impact on the real estate market, Immoscout24 reports. In five of Germany's top seven metropolises, demand for luxury new-build flats fell year-on-year from January to April 2022, in some cases sharply. For the analysis, new-build condominiums with prices per square metre from €10,000 were considered in the period from January to April 2022. 

Prices per square metre for new-build condominiums had risen continuously in Germany's metropolises over the past five years. The inflation rate from 2017 to 2022 ranged from 25 per cent in Munich to over 70 per cent in Berlin or Düsseldorf. Now demand, measured in contact requests per week, has fallen by an average of 73 percent in Düsseldorf, 46 percent in Cologne, 44 percent in Frankfurt am Main and 26 percent in Hamburg. Overall, demand for properties to buy in the first quarter of 2022 has slumped by 17 percent as a result of the drastic interest rate development.

The Immowelt Group forecasts an end to the real estate boom this year. Higher construction interest rates, uncertainties caused by the war in Ukraine and high inflation are leading to a decline in demand, especially for older properties in need of renovation. 

A closer look at the buying conditions in the individual regions of Germany is worthwhile, say the experts at the Hamburg Institute of International Economics (HWWI). They expect future price rises in many major cities, the Hamburg and Berlin hinterland and in the Weser-Ems region, but falling prices in large parts of eastern Germany. Those who want to invest in real estate now should pay attention to two factors: moderate purchase prices compared to the net cold rent and the expected value development. 

(Photo: © S. Hermann and F. Richter, Pixabay)