Rising interest rates, high inflation, an energy crisis, and a lot of global uncertainty are usually not ingredients for a booming market. The German real estate market seems to be finally catching up to realities as the Housing Index in Germany decreased to 222.97 points in August.
The German property market has been growing without interruptions since 2009; however, according to a new report by the Hamburg-based Gewos Institute for Urban, Regional, and Housing Research, this period of rapid growth could end. The Institute expects a 7% drop in commercial real estate and land sales this year, making up roughly €315.5 billion ($308.10 billion).
Meanwhile, Welt’s Holger Zschaepitz proclaimed the German housing boom is over, showing a chart of Germany’s major real estate lender, Hypoport group, shares plummeting 34% after they suspended their full-year forecast.
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“This chart highlights that the housing boom in Germany is over. The real estate lender Hypoport shares plunged as much as 34%, the most ever, after the group suspended its forecast for the full year, saying residential mortgage finance customers are holding back on property purchases.”
Post-Covid boom
On the other hand, Gewos believes that prices will not drop since the pressure on German housing remains high due to strong immigration, but new construction will be halted due to rising credit and energy costs.
In 2021, the housing market in Germany saw sales of €337 billion ($328.99 billion), an annual increase of 14.5% and twice as much as ten years ago. This burst in activity in the real estate market followed the Covid lockdowns as people sold apartments to buy homes in more rural areas, but it was also a catch-up play.
Real estate could be a bad investment in Germany with a possible slowdown and drop, but a lot will depend on the energy market and Central Bank policies going forward.
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