Housing construction facing dark times: real estate prices are falling, rents are rising - prospects for 2024 are foreseeable.

Housing construction facing dark times: real estate prices are falling, rents are rising - prospects for 2024 are foreseeable.

According to a report from www.mdr.de, real estate prices fell in 2023 for the first time since 2010. The downward spiral in housing construction continues, while rents in large cities and metropolitan areas continue to rise. The studies and experts assume a further downward spiral, as construction completions will also decline significantly in 2024. The forecast for 2024 is around 225,000 residential units, which means 45,000 fewer apartments than in the previous year. According to the DIW Institute, the real estate bubble burst in Germany in 2023, which led to a decline in real estate prices.

The increased inflation rate and the increase in the cost of financing have affected households' purchasing power and made interest rates unaffordable. As a result, the supply of rental apartments has stagnated, while demand in metropolitan areas continues to increase. This has led to a three percent increase in rental prices. Investment and demand continue to stimulate the real estate market, with steady population growth coupled with sluggish housing construction expected to continue to drive prices higher.

Falling purchase prices will likely continue to fall in 2024 before the market stabilizes and prices rise. The ongoing shortage of living space will result in a medium-term increase in purchase prices, as demand exceeds supply in many places and housing production will continue to decline for the foreseeable future.

The challenge for the state is to bridge the ever-widening gap between urban and rural areas. This could be achieved, among other things, by investing in appropriate infrastructure and through a nationwide reduction in real estate transfer tax. In addition, building regulations should be streamlined and approval procedures accelerated in order to promote housing construction. The state could also alleviate the housing crisis through increased government investment in housing construction and the attractiveness of small towns and the surrounding areas.

The underlying study reports on a difficult future for the real estate market and provides insights into the mechanisms that influence development. It is assumed that the trend of rising rents and falling purchase prices will continue in 2024, but the market will stabilize and a subsequent price increase can be expected.