Rising real estate prices: experts warn of a buying trap!

Rising real estate prices: experts warn of a buying trap!

Real estate prices in Germany are currently showing an upward trend, which poses significant challenges for many potential buyers. A survey by the financing broker Interhyp shows that 55 percent of those surveyed rate residential properties in their region as “slightly” or “moderately” affordable. This is a decrease of four percentage points compared to the previous year, although it shows a positive development compared to two years ago. The decline in affordability assessments is alarming and reflects market changes. Loud Swabian The phase of falling prices on the real estate market has ended and purchase prices have risen by around five percent since January 2024.

Interhyp's survey, which surveys around 1,000 people online every year who are interested in buying a property or who have purchased a property in the last five years, also shows that 68 percent of participants have noticed property prices rise in the last twelve months. The rise in interest rates in 2022 and 2023 had previously deterred many potential buyers and meant that many interested parties could no longer afford home ownership.

Market development and price structure

The background to the current situation was not only rising prices, but also the pressure caused by low interest rates and the corona pandemic. In 2021, the real estate market experienced a boom in demand, resulting in an increase in average property prices to around 490,000 euros, an increase of around 10 percent compared to the previous year. These developments emphasized Interhyp with reference to the effects of the pandemic and the trend towards more home offices, which increased considerations about changing residence.

The forecasts for the coming years indicate that demand will continue, but at a slower pace. High purchase prices and additional costs continue to represent an obstacle for buyers. In particular, an impending increase in interest rates could significantly worsen the situation. For example, an interest rate increase of 0.2 percentage points could increase the interest costs for an average loan by around 5,700 euros, while 0.5 percentage points could even cost an additional 14,500 euros.

Government policy and funding

The new federal government has already announced measures to counteract the ongoing rise in real estate prices. This includes, among other things, the plan to build 400,000 new apartments annually and to implement various support systems for the purchase of home ownership. These include equity-replacing loans and repayment grants. In order to improve the affordability of residential properties, Interhyp emphasizes the importance of financial resources and effective implementation of the required measures. In addition, the rent cap is to be extended and the cap on rent increases is to be reduced.

Overall, the situation on the real estate market is becoming increasingly complex and challenging for both buyers and investors. Signs point to continued pressure on prices, while policy measures need to be put in place to regulate and support those interested in purchasing.