Real estate market: Price negotiations are worthwhile again

The turnaround in interest rates has thrown a spanner in the works for many prospective real estate buyers. The monthly burden of borrowing to buy property has risen sharply, and the typical affordability threshold has been exceeded for large sections of the population. This is true at least for people with a medium income.

With interest rates rising to almost four percent in the first half of 2023, buyers will have to pay more than 40 percent of their median income to finance a property with 130 square metres of living space. This means that home ownership is no longer affordable in most large cities. This also applies to 40 percent of the districts in the immediate hinterland, if no more than 30 percent of the median household net income is to be spent on financing. In the direct hinterland of the seven largest cities, home ownership was not affordable under the set conditions in any of the districts in the first half of 2023.

Potential home buyers must expect a significantly higher financial outlay than in previous years, at least in the short to medium term. The market is already reacting to this change. For the first time in many years, property prices are falling significantly. Stiftung Warentest reports: In the first quarter of 2023, condominiums cost on average 2.6 per cent less than in the first quarter of 2022. The drop in prices is particularly strong in Frankfurt am Main with a minus of 8.4 per cent. Data for the first quarter of 2023 for the seven largest German cities and 20 other cities and districts are available at test.de. The figures come from vdpResearch and are based on purchase contracts actually concluded.

A current analysis by ImmoScout24 shows how the asking prices for properties develop year-on-year depending on the energy efficiency class: Class A and B properties in the independent cities are almost stable in price. The asking prices for properties in energy efficiency classes C and D are falling by eight per cent in the cities. In classes E to H, the price decline is five percent. It is worthwhile for prospective buyers to consistently negotiate the purchase price.

The Cologne Institute for Economic Research also calls for a modern state subsidy for home ownership. Lowering the real estate transfer tax could also make an important contribution to relieving the burden on property buyers.

(Photo: © Gerd Altmann, Pixabay)