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In the meantime, simply unaffordable? A single-family house

Photo: U. J. Alexander / IMAGO

After the slump in 2022, activity on the German real estate market is declining even more sharply in the current year, according to a study. Based on the deals registered at the end of the first half of the year, the Hamburg-based Gewos Institute expects only around 591,800 real estate transactions.

That would be almost a quarter fewer trades than in the already weak year 2022 and the lowest value since the start of the all-German time series in 1995. The nationwide sales volume is expected to fall by 29.1 percent to around 198.1 billion euros. Sales and case numbers are the strongest declines ever measured, the institute said.

»Pronounced reluctance to buy«

In the current year, the consequences of the rise in interest rates are more evident than in 2022, explained Gewos expert Sebastian Wunsch. The moderate decline in purchase prices so far has not come close to compensating for the increase in financing costs. For owner-occupiers, buying real estate is becoming increasingly difficult as financing costs rise and high inflation reduces purchasing power. Investors, on the other hand, waited out of uncertainty.

Wunsch emphasized: "The current market situation continues to be characterized by a pronounced reluctance to buy. At present, we do not see any significant changes in the market-determining factors for the remainder of the year." The inflation rate is far from the central banks' targets, so that interest rates are not expected to ease in the medium term. Purchase prices are expected to stabilize at the end of the year because they are currently falling more slowly.

For the study, Gewos analysed data on land purchase agreements concluded by the expert committees nationwide and the associated turnover.

According to the survey, real estate sales slumped to 2022.279 billion euros in 4 – a decline of 17.2 percent compared to the record year 2021 and the abrupt end of a long-term boom. The number of transaction cases had fallen by 16.1 percent to 787,700 in the same period of the year.