Real estate prices in Germany have fallen since July. It shows data like European house price index or provider interhyp. Yesterday’s statements from the Association of Savings Banks from Bavaria show almost the same half New business in real estate loans. This clearly shows that there is some kind of buyers strike. Interest rates that have risen so quickly make monthly payments more expensive – there’s also 20% inflation for groceries and higher construction costs. The blanket package is currently causing consumers to shy away from buying property or building new ones. The data published today also shows how low real estate prices really are, especially in eastern Germany. But there is still no unified picture. There are also areas where prices are higher. More importantly, the price drop is due in part to demographic change.
Home prices are falling in 12 of the 50 provinces
such as imwelt portal reports, the real estate boom is already over in some areas of eastern Germany. In 12 of the 50 areas examined, the purchase price of condominium units fell within a year. This is the result of an analysis of asking prices for existing apartments (75 square meters, 3 rooms, first floor, built in the 1990s) in 50 urban and rural areas in eastern Germany in October 2022 compared to the previous year. Real estate prices are dropping significantly! Because of the increased interest in construction, buyers have to incur additional costs of several hundred euros per month, depending on the purchase price. Thus the demand for real estate is declining in many areas, while the supply of real estate for sale is increasing at the same time. For comparison: at the beginning of the year, buyers received about 1% interest on a 10-year loan. According to Immowelt, interest rates are already well above the 4 percent mark — given the constant increases in the key rate, the trend is up.
Look at the details when prices drop
Deteriorating financing conditions and declining demand drove real estate prices down in many cities in eastern Germany. According to Imwelt, Jena recorded the largest decline of all metropolitan areas at -12 percent. This may be due to the high level of prices in the city of Thuringia students. The higher the purchase price, the greater the impact of higher interest rates. A year ago, the price per square meter was 4,090 euros – the third highest value in the full analysis. Apartments are now being offered for €3,604. According to Immowelt, the most expensive place to buy is in Potsdam. But prices have also fallen in the capital of the state of Brandenburg: by 4 percent, to now 5,297 euros. Smaller price corrections, but also price drops, can be seen in Leipzig (€2,598) and Halle (€2,595). In neighboring cities, prices will drop by 2 percent each.
There are also price increases
However, many cities are still posting raises. In Berlin (€5,124), the price curve slowed last year, but according to Immowelt there is still a 3 percent increase in comparison year on year. One of the reasons for the increase is that although the demand for capital has decreased, it still exceeds the supply due to its high attractiveness, especially for investors. In addition to Berlin, real estate prices are also rising in Dresden (€2,941; +4 per cent) and Erfurt (€3,212; +5 per cent) at the moment. Magdeburg in particular (€2,072; +10 per cent) is on the rise and is gradually catching up with other major cities in East Germany. Stability of large businesses and job creation, along with hitherto low housing prices, ensures high demand. The largest increases can only be seen in the cities most suitable for the analysis. Apartments in Gera are 18 per cent more expensive, but at €1,333 per square meter, home ownership remains cheap and affordable for many people despite difficult financing conditions. The same applies to Chemnitz (1,618 euros) and Eisenach (1,760 euros), where the increase is 14 percent each.
Rural areas experiencing a sharp decline in real estate prices
Development also varies greatly in rural areas. In the Erzgebirge region, asking prices fell by 14 percent – the largest drop in the analysis. According to Immowelt, the offering is likely to be less associated with higher interest rates, given that the price level is currently very low at €1,046 per square metre. Rather, it is because the population has been steadily declining for years, which means that demand is declining. The same applies to the Saxon districts of Bautzen (1,475 euros; -5 percent) and Meissen (1,784 euros; -4 percent). In the provinces of Oder-Spree (€2,404) and Rostock (€2,623), the population is slowing down. Home prices seem to have been somewhat inflated in the past, and are now down 9 percent each.
However, in many areas, the price curve continues to point upward. According to Imwelt, demand is still high around Berlin. The possibility of working from home and lower prices compared to the capital make life in the surrounding area attractive. In Barnim County (€2,554), the cost of home ownership increases by 27 percent as a result – among other things, the largest addition of all counties. Potsdam-Mitelmark (3,301 euros) is 19 percent more expensive, and Tilto-Flaming (2,710 euros) is 15 percent more expensive. In addition to the areas of Brandenburg around Berlin, real estate prices are also on the rise in some very cheap areas, where many people are still able to own their own homes. In the Leipzig district (€1,675), existing apartments are currently 27 percent more expensive than they were a year ago. Because of the lower prices, many buyers can avoid the more expensive Leipzig. In the Thuringian Elm region (€1,797; +23 per cent) and the Saxony-Anhalt regions of Anhalt-Bitterfeld (€1,334; +22 per cent) and Salzlandkreis (€1,092; +21 per cent) the price level has increased significantly, but at lower level levels.