Will real estate prices rise again soon?

Many prospective homebuyers are unsure whether buying their own home is worthwhile right now. However, now is still a good time to purchase property. According to a study by Deutsche Bank, real estate prices will soon rise again.

Due to the still relatively high property prices, coupled with increased inflation and interest rates, many prospective homebuyers are currently holding back. They are hoping for falling prices or a decrease in inflation and interest rates. However, both of these scenarios may not materialize. A study by Deutsche Bank dated April 18, 2023 , concludes that the current price declines are very likely only a temporary dip.

"Interest rate peak" soon reached

Financial experts anticipate another interest rate hike by the European Central Bank. However, analysts at Deutsche Bank foresee an "interest rate peak" that could be reached as early as this year. They expect mortgage rates, which stood at 3.6 percent in February 2023, to remain at that level by the end of the year.

However, the still high inflation rate puts this figure into perspective, leading experts to predict a negative real interest rate. This could incentivize investment. The study concludes: "In this case, borrowers can leverage inflation to their advantage, meaning they have to repay less purchasing power than they borrowed."

Prices have already fallen sharply

The study identifies another reason in the already sharp decline in real estate prices. If inflation continues, real estate would once again become a more attractive hedge against inflation, and demand would thus rise again, leading in turn to further price increases.

Rents are rising

While political regulations prevent substantial rent increases, experts anticipate a rise in short-term rentals, furnished rentals, and indexed rents, leading them to conclude that higher rent growth is likely.

Supply remains tight

According to the study, the main cause is the "fundamental shortage of supply." Despite decreased demand, many German cities are still experiencing high demand meeting low supply.

Anyone considering buying a property might be ill-advised to wait. Now could be an opportunity that should be seized. A reputable local real estate agent can tell you which properties are worth considering and help you find one at a reasonable price.

Would you like to know if buying a property is worthwhile now, or do you need help finding an affordable property? Contact us! We'd be happy to advise you.

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

Photo: © Elenarts/Depositphotos.com