Study: Real estate prices continue to fall - financial expert explains impact on buyers and tenants.

Study: Real estate prices continue to fall - financial expert explains impact on buyers and tenants.

According to a report by www.n-tv.de,

Buyers of apartments and houses are benefiting from significantly lower prices this year, even in large cities. Recent data shows that the decline continues in the third quarter. At the same time, tenants are among the losers; they have to dig deeper into their pockets.

According to the most important real estate financiers, the decline in house and apartment prices is continuing. According to data from the Association of German Pfandbrief Banks (VDP), residential properties fell in price on average by 1.7 percent in the third quarter compared to the second quarter. Compared to the same period last year, there was a decrease of 6.3 percent, reported the association, which represents, among others, Deutsche Bank, Commerzbank, Landesbanken and large savings banks. The numbers show that the real estate market is taking longer to stabilize than many expected. With the renewed decline, residential property prices in Germany fell for the fifth quarter in a row, according to VDP data. There were also significant price reductions again for commercial real estate.

The main reason for the drop in prices is the sharp rise in interest rates, which makes loans more expensive and further reduces demand for building financing. In the second quarter, according to the Federal Statistical Office, residential real estate prices fell surprisingly sharply by almost ten percent compared to the same period last year - the largest decline since 2000.

In the seven largest cities, where living space is particularly scarce, residential property prices fell by 1.3 percent compared to the previous quarter and 5.7 percent compared to the same period last year, slightly less than the national average. Within a year there was the largest price decline in Frankfurt (9.1 percent) and the smallest in Berlin (4.7 percent). Düsseldorf, Hamburg, Cologne, Munich and Stuttgart were in the corridor between minus 5.1 and minus 6.8 percent.

The strong upward pressure on the rental market continued, and new contract rents rose by 5.8 percent year-on-year in the third quarter. According to VDP calculations, the price declines in commercial real estate were once again particularly large. At 10.6 percent compared to the same quarter last year, office properties fell more expensively than retail properties (-9.3 percent) for the first time since 2009. The trend towards home offices and stricter energy requirements are putting a strain on the office markets, while retail properties are suffering from the trend towards online trading and consumer restraint due to inflation.

The ongoing decline in real estate prices and the parallel increase in new contract rents are having an impact on the entire real estate market. Buyers benefit from falling prices, while renters have to dig deeper into their pockets. The situation is particularly challenging in large cities because living space is scarce and expensive. The continued market stagnation and price decline could have long-term effects on the entire real estate industry.