Real estate offers protection against inflation
Published on: , by
Does real estate offer protection against loss of value in times of crisis? How do property prices develop in phases of high inflation and high interest rates? Specialists are optimistic about the future for property owners: strong housing markets remain strong.
The market for real estate is currently experiencing a significant change. After about ten years of low interest rates, during which real estate prices rose incessantly, a new economic phase is now beginning. It brings changes for owners and renters, for prospective buyers and sellers.
This change is not only taking place in Germany, but throughout Europe. The service company Savills reports: While the number of property sales fell in Germany, Ireland, the Netherlands and Sweden in the second quarter, there was a significant increase in market activity in the UK, Denmark and Spain. Investors with higher leverage have temporarily pulled back to wait for the development of interest rates, inflation and construction costs.
How a change in the market can take place in a very drastic way can just be observed in Australia and New Zealand. The Handelsblatt reports that prices there are collapsing more than anywhere else in the world. In the New Zealand capital Wellington, the median house value in the metropolis was still 995,000 New Zealand dollars in February 2022, but has since plummeted to 780,000 New Zealand dollars.
Strong housing markets remain strong. This is the conviction of the consultancy Colliers: "Rising interest rates and construction prices are currently leading to a sharp decline in new construction activity. The consistently high demand will therefore exceed supply even more significantly than has been the case so far. We expect a stabilising price level, significantly rising rents and, as a result, increasing rental yields."
In Germany, real estate transactions are currently slowing down, but continue to have a stable trend. In Berlin, purchase prices for condominiums rose by 4.3 percent in the first quarter of 2022, while in Frankfurt am Main, new flats became three percent more expensive. In Munich, there were around ten percent more transactions.
(Photo: © Kerstin Herrmann, Pixabay)