It comes as a surprise to many: despite the coronavirus pandemic, property prices in major cities and their outskirts continue to rise. This is due to persistently high demand and the ECB's low interest rate policy. However, economic experts are forecasting a turnaround within the next five years. For property sellers, now is the best time to sell, but property seekers are currently finding it very difficult.
Almost everywhere in Germany - with a few exceptions in structurally weak regions - real estate prices have only been going in one direction for ten years: upwards! According to calculations by the Bundesbank, average prices in German cities have more than doubled since 2010. And neither the first lockdown last year nor the current one has been able to slow down the price upswing significantly. Although prices stagnated briefly in the middle of last year, they have continued to rise since then, albeit at a slightly slower rate than before.
The situation in the metropolitan areas
One reason for this is the continuing high demand and the ongoing shortage of new housing, particularly in the metropolitan regions. These have recorded strong population growth in recent years, partly due to international immigration and partly due to the influx of people from the surrounding regions. Although this growth is slowing somewhat due to the lower level of immigration during the coronavirus pandemic, this has not yet had a relieving effect on the tight housing markets. Owner-occupiers are desperately looking for their own four walls, but investors are also pouncing on condominiums, apartment buildings and commercial properties. Few things seem more attractive to investors than real estate, as there are currently hardly any alternative investment opportunities due to the low interest rates, while at the same time the low interest rates ensure exceptionally favorable financing conditions for property purchases.
Trend reversal expected for 2024
However, experts are seeing the first warning signs that the price boom will come to an end within the next few years. A possible trend reversal is forecast for 2024. One possible reason cited is a decline in the population, which is expected to be offset by a higher number of new buildings completed by then, thus reducing the housing shortage. Analysts also point to a growing risk of inflation, which would lead to a slide in property prices as a result of the increase in the cost of financing loans.
What does this mean for property owners? Anyone thinking about selling their property in the near future should decide to do so soon. After all, windfall profits can still be made now. As long as interest rates remain low, buyers are willing to pay record prices for real estate in this tight situation. Anyone looking for a property, on the other hand, is having a hard time, not only because of the sharp rise in prices, which are no longer affordable for many despite good financing conditions, but also because there are hardly any properties on offer at all.
One alternative could be to buy a property at a foreclosure auction. But even the number of foreclosures has fallen recently despite corona.
Would you like to seize the opportunity and sell your property now? Get in touch with us! We will be happy to advise you and support you with optimal marketing.
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Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.
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