Rise in residential real estate prices is slowing - is the market turning?
4 min.
Despite the pandemic, the real estate markets remain tight in many locations. There are now initial signs that the situation on the real estate market is easing. This is according to a study on the development of residential real estate prices in Germany by Landesbank Baden-Württemberg.
The bank sees the current slower rise in real estate prices as a relief. According to the study, this is also a consequence of the pandemic, which is apparently now having an impact on the real estate market after all.
Immigration to German cities ebbs
According to the study, the following could be observed: While the pandemic has not necessarily had an impact on price levels, it has had an impact on the influx of people into cities. Accordingly, fewer people than before are looking for a home in conurbations. Fewer young people have also come to the big cities to study and work. As a result, the number of inhabitants in some cities such as Stuttgart or Berlin is stagnating or falling.
This differs from the trend in recent years, where there has been more of an urban exodus of families and low- and middle-income earners. The reason for this was the rise in prices on the real estate and housing market. If there was no other option, people moved to the outskirts of cities or even further out into the countryside. In addition, more and more young people, especially from abroad, came to the cities to study, train or work.
The study also cited the structural change in the automotive industry as another reason for the decline in the number of inhabitants in some regions and cities, which has led to a reduction in the number of inhabitants in Stuttgart in particular. According to the study, there was a decline from around 615,000 inhabitants to just under 605,000 inhabitants between 2019 and 2021. The study cites the switch to electromobility as the reason for this change.
Rise in interest and yield levels
LBBW forecasts that interest rates and yields on mortgage loans and bonds will rise moderately over the next few years. However, the ECB is not expected to raise its key interest rate before 2024. Interest rates will remain at a low level for the time being.
Energy efficiency determines the price to a greater extent
The real estate market will continue to develop differently. In addition to the property location, energy efficiency will also have a greater influence on property prices in the coming years.
This is due to the climate protection targets set at EU level. In future, a building's energy indicators will also have a significant influence on the price.
As a result, the energy properties of a property are becoming increasingly important for the property price. Whether and how a house is thermally insulated or how the building is heated determines the sales price property owners receive when selling.
What this means for owners and buyers
According to the authors of the study, the housing shortage will persist for some years to come. This is because residential real estate remains an attractive investment. However, property buyers can expect the market to ease slightly. For owners willing to sell, this means that they will continue to receive good sales prices for their property, depending on its location and condition.
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Notes
For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.
Photo: © Viktoriia1208/Depositphotos.com
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