According to the Hamburg-based Gewos Institute, the German real estate market is likely to recover after the crisis year of 2023. One important reason: housing has become more affordable for owner-occupiers thanks to lower purchase prices, slightly lower loan interest rates and rising wages, according to a new forecast by the Gewos Institute for Urban, Regional and Housing Research.
In recent months, the number of purchases on the real estate market has increased. The trend is likely to continue over the course of the year – albeit from a much more subdued level. “In the medium term, transactions, money turnover and purchase prices will not return to pre-crisis levels,” it says, referring to the years-long real estate boom in Germany, which ended in 2022 as a result of sharply increased lending rates.
In the meantime, not only real estate prices but also construction interest rates have fallen noticeably again. According to FMH Financial Advisors, the average interest rate for ten-year real estate loans was 3.3 percent recently – twelve months ago it was just under four percent per year. At the same time, wages have risen significantly for many people because unions have pushed through high wage agreements in the face of the wave of inflation.
Property in greater demand again
Specifically, Gewos expects sales of residential real estate to rise by around 11 percent to more than 172 billion euros this year (2023: 155.7 billion euros). The number of purchase transactions is also expected to increase by around 11 percent to around 545,000. While owner-occupiers benefited from better affordability, real estate investments remained rather unattractive for investors. Despite rising rents, the return gap compared to lower-risk investment forms remains small, said Sebastian Wunsch, Head of Real Estate Analysis at Gewos.
No improvement in housing construction
Gewos sees no improvement in the struggling housing construction sector. “Current figures from the expert committees indicate a further decline in residential building land sales this year, especially for owner-occupied properties,” said Wunsch.
Last year, the German real estate market plunged into a deep crisis. According to Gewos, there were particularly large declines in sales for residential building land, multi-family homes and commercial real estate, while the owner-occupied home segment remained the most stable.
In total, sales on the real estate market in 2023 amounted to around 202.4 billion euros, a drop of almost 28 percent compared to the previous year. The number of transactions fell to an all-time low of around 666,700 (-15.2 percent). For the study, Gewos analyzed nationwide data on land purchase contracts concluded with the appraisal committees and the associated sales.
© dpa-infocom, dpa:240919-930-236749/1
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