Up until this spring, the segment for freehold apartments was still registering significant price rises, with a 10.3 percent increase in the first half of 2022 (HY1 2022: 4,095 per square metre / HY1 2021: 3,713 euros per square metre). From May 2022 onwards, asking prices plateaued across Germany and in the majority of towns and cities surveyed by Engel & Völkers. In July, moderate price declines were registered compared to the previous month of June in Germany’s Top 7 cities, which include Munich (-1.9 percent), Frankfurt (-1.2 percent), Düsseldorf (-1.4 percent) and Hamburg (-1.3 percent). Berlin and Stuttgart, on the other hand, witnessed slight increases in asking prices of +0.4 percent in the capital and +0.7 percent in the state capital of Baden Wurttemberg. With an average price of 10,067 euros per square metre, Munich leads the ranking of all the locations surveyed, followed by Frankfurt at 6,918 euros per square metre and Hamburg at 6,769 euros per square metre. Due to the ongoing shortage of available listings in many places, prices remain stable at a high level. “Living space in city centres is still very much in demand. The availability of freehold apartments in particular remains too low and the population influx into the big cities is so high that prices will continue to plateau and no major downward corrections are to be expected. Many buyer groups are showing strong credentials in terms of equity, in the prime locations in particular, meaning that slight price rises may still be seen in some locations,” says Till-Fabian Zalewski. Through to the end of 2022, Engel & Völkers forecasts moderate price rises in prime locations in more than a quarter of the 56 towns and cities surveyed.
In the market segment for detached and semi-detached houses, the development in interest rates also had a stifling effect on the rise in prices for the first time. While the percentage price increase in the first half of 2022 was as high as 13.7 percent year-on-year (HY1 2022: 390,000 euros / HY1 2021: 343,000 euros), only moderate changes in asking prices have been registered since June. The Top 7 metropolitan areas of Cologne (+ 0.7 percent) and Stuttgart (+ 5.8 percent) recorded slight price rises, while Munich (-1.5 percent), Berlin (-1.1 percent), Düsseldorf (-0.6 percent), Hamburg (-0.4 percent) and Frankfurt (-0.1 percent) all witnessed a slight decrease in prices. With an average asking price of 1.4 million euros, Munich remains the highest priced location in Germany in July 2022, followed by Heidelberg at 975,000 euros and Stuttgart at 898,000 euros. At the same time, there was a considerable rise in the number of publicly advertised property listings across Germany in the summer due to longer times to market as a result of the increased reluctance to buy. “Although buyers have become more discerning, the market also now offers many opportunities,” says Till-Fabian Zalewski, who goes on to emphasise: “Clients with a serious interest in buying have the chance right now to acquire properties that were more difficult to acquire in recent years due to competition from fellow bidders. In many cases, buyers now have the freedom to choose between different properties once again.”
Valuations on the residential real estate market in Germany continue to be very stable, and while market activity has remained dynamic in recent years, real estate has also proven to be resistant to crisis. In 2021, for example, the transaction volume was 182.4 billion euros and, despite the pandemic, grew 11.7 percent over the previous year (2020: 163.3 billion euros). Even with the recent rise in interest rates, no significant decline in prices is expected in Germany’s major cities until the end of 2022. With regard to availability, the more restrained demand for residential property comes at the same time as a recent decline in construction activity due to a lack of available land for development and higher construction costs. Due to the worsening of financing conditions for some property buyers, pressure on the rental market is on the rise. Looking ahead to the coming winter, buying interest is focused in particular on newly built properties and existing homes that have been renovated with energy efficiency in mind and have modern heating systems installed. “The high demand for houses continues, as does the desire to own a home of one’s own. The level of supply is still too low to meet demand – a fact that will more than compensate for the higher interest rates,” says Till-Fabian Zalewski, who stresses the importance of location: “Real estate, especially in very good locations, remains a crisis-proof investment – not least because competitive investment alternatives are lacking.”
For the coming months, Engel & Völkers anticipates that prices will remain stable in very good locations and only fall in isolated cases. The development of interest rates will impact the market. Some demand could shift to lower price segments as a result. At the same time, the shortage of real estate and decline in new construction activity will have a stabilising effect on the market. “While general sweeping statements were possible in recent years due to price rises across the entire country, exact forecasts are now difficult to make. They will depend greatly on global political and economic factors. It is therefore crucial now and in the coming months to take a close look at the respective micro-location and the property,” says Till-Fabian Zalewski. In the federal states of Hamburg and Saxony, for instance, the real estate transfer tax is set to be increased in 2023, meaning that it might be worthwhile in individual cases to bring forward a planned property purchase. Due to the geopolitical situation, buyers are becoming increasingly interested in energy-efficient real estate, which in turn will mean there will be a greater need for advice on issues such as energy-efficient renovations in the future. “In turbulent times like these, seeking professional advice from experienced real estate experts is especially important – in order to be in a position to assess the changing market climate correctly,” ´Till-Fabian Zalewski adds.