Price reductions for properties for sale: Has the bottom been reached?

The historically low interest rates and enormous increases in property prices were followed by a surge in interest rates and a fourfold increase in financing costs. As a result, prices fell nationwide, in some cases drastically. Now, media reports are increasingly suggesting that the bottom has been reached. Is this really the case?

Determining how real estate prices are developing in Germany is not straightforward. This is because the actual sales transactions recorded by notaries are analyzed by approximately 1,000 valuation committees, each publishing their findings at different times. Furthermore, current asking prices on online portals are not a reliable indicator of what Germans are actually paying for real estate in different regions.

Few sources actually provide information about current price movements, such as the indices of the financing platform Europace and the Association of German Pfandbrief Banks. Both process financing data, which naturally includes the actual purchase price.

Both trend lines showed a sharp bend in the graph towards the end of the year – real estate prices fell sharply. Since then, the price reductions have lost some momentum. This means that while purchase prices for real estate in Germany continue to fall, they are no longer doing so as rapidly as at the beginning of the year.

Many analysts conclude from this that there will be smaller price reductions by the end of the year and that purchase prices will move sideways next year, i.e., remain stable.

However, this would still leave a large gap between the financing options of many households and the sales prices in many regions, because it is not expected that financing interest rates will fall in the coming year.

Experts therefore assume that in cities with high housing costs, price corrections will continue, at least until high earners with a net household income of around €5,000, who currently would not be able to obtain financing at current asking prices, can participate in the real estate market again.

In rural areas, on the outskirts of towns and cities, and in small and medium-sized towns, price levels have in some cases already reached a point where purchasing property is once again affordable for middle-income earners. Therefore, a precise location assessment of the property by a local, reputable real estate agent is more important than ever. Looking at the current market can be misleading and, especially during this market phase, can lead to serious misjudgments when selling.

Do you want to have the value of your property determined? Rely on a professional property valuation from a real estate agent you trust.

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.

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