Buying property: falling interest rates and falling prices

Property prices are bottoming out, the purchase market is less competitive, falling interest rates are increasing the purchasing power of property buyers and lower prices are making property purchases more attractive again.

Prices for energy-efficient properties are already on the rise again. This is shown by a recent analysis by ImmoScout24. Prices for properties in classes A and B are rising by two per cent year-on-year, while prices for properties in classes C to H are falling by around seven per cent. The need for refurbishment in Germany remains high. This is important for prospective buyers. Because in addition to the purchase price, refurbishment costs are also incurred after the purchase. 

The slowdown in the downward trend in property prices is slowly making itself felt on the property market. Demand, which has been weak in recent months, is picking up somewhat. Prospective buyers are still facing little competition with an increased supply. On the rental property market, however, the situation is quite different. The pressure of demand is enormous - in some cases there are several hundred enquiries for one rental offer.

According to the immowelt Price Compass, asking prices for existing flats fell by an average of just 0.2 per cent across Germany in the fourth quarter of 2023. An end to the price decline is in sight. In 30 of the 75 major cities surveyed, purchase prices actually rose again in the last quarter - by 4.2 per cent at the peak. Rising prices can be seen in Berlin, Hamburg and Cologne, falling prices in Munich, Frankfurt and Stuttgart.

After a year and a half of falling property prices, the property market has slowly adapted to the changed conditions in 2023. As mortgage interest rates fall, the purchasing power of potential buyers is also increasing again. 

Summary: The period of low interest rates led to an extraordinary boom on the property market. Property prices rose ever faster. Property became unaffordable for broad sections of the population. Now there are once again opportunities for prospective buyers. 

(Photo: © 472301, Pixabay)