Demand high, supply scarce: houses and apartments continue to become more expensive

Demand high, supply scarce
Houses and apartments continue to get more expensive

Prices have risen by more than ten percent for four quarters in a row: The real estate market is still booming – but the trend seems to be slowing down. Experts assume that rising interest rates will discourage more and more people from buying an apartment or house.

Houses and apartments in Germany have become more expensive by more than ten percent for the fourth quarter in a row. However, the price increase appears to be slowing down somewhat. In the period from January to March 2022, the prices for residential real estate rose by an average of twelve percent compared to the same period last year, as reported by the Federal Statistical Office based on preliminary figures. The rate of increase within one year was over ten percent for the fourth time in a row.

Compared to the previous quarter, apartments and detached and semi-detached houses rose by an average of 0.8 percent. “This indicates a slight weakening of the momentum,” said the Wiesbaden authority. In the third quarter of 2021, prices for residential real estate rose by 4.1 percent and in the fourth quarter of 2021 by 3.1 percent compared to the respective previous quarter.

Demand is high, supply scarce. The trend towards working from home during the Corona crisis has also boosted interest in living space in the country. In view of rising building interest rates, expensive building materials and delivery bottlenecks, some experts expect the real estate boom in Germany to slow down after more than ten years. Especially because of rising interest rates, more and more people could no longer afford to buy an apartment or a house.

The demand for real estate for sale in the first quarter of 2022 fell by 17 percent within a year, as the online portal Immoscout24 recently determined. Experts at Bank LBBW expect a price correction above all if interest rates continue to rise sharply while the economy is not making any headway. Then price drops of 20 to 25 percent are possible.

Advertisements for residential properties for sale are now online longer than in the previous year, as it is more difficult for sellers to find buyers. Instead, significantly more people are looking for properties to rent again. “These developments could have a dampening effect on price developments in the medium term,” said Immoscout24 Managing Director Gesa Crockford.

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