There are increasing signs on the real estate market that the crisis is slowly coming to an end. However, Commerzbank does not expect house prices to rise quickly. This has to do with the interest rates for property buyers.
According to Commerzbank, property buyers cannot hope for a significant drop in construction interest rates for the time being. The European Central Bank is likely to lower key interest rates by one percentage point by next summer, according to a new analysis. However, this would be somewhat less than currently expected on the capital market, which would limit a decline in interest rates on ten-year mortgage loans. “The latter are unlikely to be much lower than they are currently in the coming months and into next year, at around 3.5 percent, and may even rise slightly again in the second half of 2025.”
The bottom line is that Commerzbank expects property prices to rise again in the coming months. “With prices and incomes generally rising, this is entirely normal.” However, the price increase in the coming year will be rather moderate – despite the lack of housing. They do not expect a new property boom like in the ten years before the interest rate turnaround. “For this to happen, interest rates on mortgage loans would have to fall drastically, which we do not expect in the coming years.”
Signs of an end to the price correction are increasing
Sharp increases in loan interest rates and construction costs have plunged the real estate market in Germany into crisis. Many people can no longer afford to own their own home. According to the Kiel Institute for the World Economy (IfW), last year saw the sharpest fall in real estate prices in around 60 years.
Recently, however, there have been increasing signs that the crisis is ending. Commerzbank points to a renewed increase in demand for real estate loans, growing transaction numbers and slightly rising prices for existing properties – after these had fallen by more than twelve percent since spring 2022. This would mean that the correction would end sooner than Commerzbank expected. Real estate is still estimated to be “overvalued by around five to ten percent,” say the experts.
Source: Stern
