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German property prices to decline 3.5% next year as purchasers feel the pressure.

According to a Reuters survey of property market experts, German house prices will decrease 3.5% next year as the cost of living issue and rising borrowing costs impact consumers, although the odds of an outright crash are low.


Last month, harmonised consumer price inflation in Europe’s largest economy was 11.6%, and the European Central Bank has been hiking interest rates at a time when the bloc is set to enter a recession, putting a burden on household budgets.


The average house price in Germany will shrink 3.5% in 2023, according to a Nov. 8-18 poll of 12 market analysts, a dramatic contrast to the 0.5% growth forecast in an August poll. They will dip 0.5% in 2024 but rise 1.0% in 2025.


However, when questioned about the likelihood of a market meltdown in the following year, 11 respondents indicated it was low, and one said it was very low. Only one person said it was too high.


‘Weakening demand for housing loans and declining consumer purchasing power indicate that the residential real estate market has already begun to turn around – however, we expect a significant price correction rather than a true crash in house prices,’ said Carsten Brzeski of ING.


Nonetheless, when asked how much prices will decline from peak to trough, the median response was 10.0%, with the largest loss being 17.5%.


‘We saw very high increases compared to the previous year in the first quarter of 2022 – compared to these values, 10% less is quite realistic,’ said Jörg Utecht of mortgage broker Interhyp.


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