The real estate market presents a paradoxical picture: although houses and condominiums are becoming cheaper, demand is weak. The reason for this is the noticeably higher lending rates.
The construction loan broker Interhyp predicts further falling prices for houses and apartments in Germany for the coming months. The market for residential real estate is currently out of balance, said CEO Jörg Utecht. According to Interhyp data, real estate prices fell sharply in the second half of 2022, especially in large cities. At the same time, according to the manager, the interest in buying is also muted.
According to Interhyp, residential properties in Hamburg, Munich and Frankfurt were eight percent cheaper towards the end of the year than in the second quarter. In Berlin or Leipzig, the average prices fell by four percent.
Rising lending rates and the consequences
The rapid increase in lending rates has made financing so expensive that many people are putting off buying an apartment or house. “The average rate has increased by 29 percent,” said Utecht. According to Interhyp, at the end of 2021 the average rate for a real estate loan was EUR 1166, and by the end of 2022 it was already EUR 1505 per month. “Many people can no longer and do not want to afford these rates,” said Chief Financial Officer Stefan Hillbrand.
According to CEO Utecht, the weak demand can also be explained by the fact that buyers and sellers are waiting. “We expect house prices to continue falling over the next few months until the market finds a new equilibrium,” Hillbrand said.
CEO: “The real estate market will come back.”
Interhyp itself also suffered from the turbulence last year. The volume of brokered loans fell by 15 percent to EUR 29.2 billion. The pre-tax result shrank by 43 percent to 61 million euros. Interhyp did not name the net profit. The market share in mortgage lending also fell from 11.8 to 10.9 percent.
The company, which belongs to the Dutch bank ING, actually wants to grow. The goal is a 20 percent market share by 2028. CFO Hillbrand assumes that this is still achievable. “The real estate market will come back,” said CEO Utecht. But first, Interhyp cut around 100 jobs. The company currently employs a good 1,600 people.
ZIA warns of a rude awakening
In the meantime, the Central Real Estate Committee (ZIA) has warned of dramatic bottlenecks in the housing market in view of the problems with construction. When it comes to housing construction, it is “not just before twelve, nor is it twelve. It’s kind of like quarter past three, and at six there’s a very bad awakening,” said association president Andreas Mattner on Tuesday. The ZIA assumes that around 700,000 apartments will be missing in 2025. That’s the equivalent of all the apartments that are currently available in Bremen and Saarland, said Mattner.
Mattner criticized that the prices were also driven by taxes that were too high. He spoke of a “state quota” of 30 to 40 percent of the “housing product”, also caused by stricter ecological requirements for new buildings.
Source: Stern
