Real estate price dynamics lose momentum

The real estate market is reacting faster than expected to the changed conditions. The rise in construction interest rates, high inflation and the extreme increase in energy prices have led to a clear reluctance to buy. Many properties are now coming onto the market quickly, before prices possibly fall.

Purchase prices for residential real estate in Germany's metropolises are rising only weakly, ImmoScout24 reports. Demand has fallen by 36 percent, while the advertised supply has risen by 46 percent. Existing condominiums show a tendency towards stagnation in Munich, Stuttgart and Hamburg.

The consultancy firm JLL also reports: The upswing in the German residential market, which has been ongoing for years with some strong increases in purchase prices, weakened significantly in the first half of 2022. The Hamburg residential market is cooling off, while the price upswing in Berlin is still continuing.

The empirica research institute expects a decline in the risk of price bubbles. The end of low interest rates puts the brakes on a further inflation of purchase prices; on the other hand, the decline in residential construction prevents the production of vacancies and thus also supports existing prices.

The Europace House Price Index reports falling prices for new builds for the first time in years, with prices falling for all segments in July 2022. The overall index is also falling this month. We see that "house prices have peaked for the time being and are just falling slightly," says Stefan Münter, Europace board member.

This shifts the opportunities when buying and selling real estate. Sellers have to expect longer marketing times, tougher price negotiations and possibly lower proceeds than expected. Buyers may be able to get their desired property more cheaply, but have to factor in higher financing costs.

Realistically assessing the purchase price of real estate has become more difficult. Currently, market conditions are volatile, i.e. fluctuating and volatile. Experienced advisors with a lot of expertise can help with pricing.

(Sample graphic: © Oleg Gamulinskiy, Pixabay)