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High house prices: Living doesn’t have to be so expensive

Nicholas by Nicholas
December 3, 2022
in News
0
High house prices: Living doesn’t have to be so expensive

Dhe biggest problem is sometimes when nothing happens at all. This is well known in Germany, but the fact that it’s the same with real estate is new this year.

It actually works like this in the world of money: When interest rates rise, investments lose value. Stock prices have fallen this year, especially those of the most promising tech stocks. Bonds, bitcoin, and even fine art have fared no better – all falling in value. All. Just not real estate.

After all, so much has happened: the years of price increases have come to a standstill. In individual cities things are going down a little bit, in the end there is stagnation in Germany.

Why aren’t real estate prices falling?

However, this may not be enough for young families looking for their own home. Mortgage rates are roughly double what they were a year ago. You can only afford the house if the price goes down in return. In fact, that’s what you should expect. But the fact that nothing has happened after a whole year of rising interest rates is not good. At least a small drop from the record highs in real estate prices should be possible, such a limited drop in value would not immediately trigger a financial crisis. The fact that prices are still not falling says a lot about the real estate market in Germany.

Not only young families depend on the loan interest. Even investors who finance their real estate on credit can actually no longer afford such high prices as before at current interest rates. If the rise in prices over the past few years had been primarily speculative, then now would be the time when real estate prices should fall.

There is a lack of living space

They don’t do that because many buyers expect even higher rents. High purchase prices with high interest rates only pay off if rents rise. And that in turn means: In Germany there is still less living space than demand. The demand is so great – in big cities there are practically no apartments left that are empty.



There are many reasons for this. Only one of them has to do with what is happening on the market: the shortage of personnel and materials, which delays construction and makes it more expensive. But most of the reasons are precisely that market activities are prevented.

Three reasons for the housing shortage

First: The Germans live too big. They now take up an average of 47.7 square meters of living space – noticeably more than ten years ago, despite the rise in rents. What happens there? Many families are sitting on old contracts that hardly allow rent increases, the children are moving out and the parents have no incentive to move.

Second, there are the building standards that are mandated for many new builds. Thermal insulation, fire protection, sound insulation and sustainability – everything is desirable, some absolutely necessary. But desperate apartment seekers would perhaps also make concessions to one or the other rule if they had to pay less for their accommodation in return. But this is prevented by the state building regulations and all the different standards that regulate every new building down to the smallest detail.

  • Julia Loehr, Berlin

  • Published/Updated:

  • ,

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Thirdly, there is the designation of building sites. Do you prefer single-family houses in the commuter belt or densification in the city? It doesn’t matter, someone is always against it. Single-family homes are blacklisted by the Greens, the development of Tempelhofer Feld in Berlin prevented a citizens’ initiative – when in doubt, it is the same people who vote for rent controls or expropriation of housing groups afterwards.

But the market is not to blame for the high real estate prices. Blame the excessive rules for construction. Virtually nothing changes about them. And if nothing happens, that’s sometimes the biggest problem.

Tags: BitcoinGermanyhouse priceinterestproperty prices

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