BENGALURU (Reuters) – Analysts polled by Reuters anticipate a milder decline in German home prices for this year compared to 2023. They attribute this to expected reductions in borrowing costs and ongoing supply shortages in affordable housing.
Average home prices in Germany have plummeted nearly 13% from their peaks in the second quarter of 2022. Last year saw the largest annual decline of over 8% since official data collection began in 2000.
Fading interest from foreign buyers has added to troubles in the beleaguered property market. In other major housing markets, including the United States, activity and prices have stayed robust despite high interest rates and elevated living costs.
The May 9-21 Reuters poll of 13 property experts projected a 2.0% decline in average German home prices this year. This figure marks a downgrade from the 1.7% fall predicted in the February survey.
House prices were then expected to rise 2.0% and 3.0% in 2025 and 2026, respectively.
That expected recovery was partly driven by predictions the European Central Bank would cut interest rates next month, earlier than the U.S. Federal Reserve, and then twice more this year.
“The German real estate market bottomed out at the end of 2023. With the decline in bond yields and mortgage interest rates at the end of 2023, demand picked up again at the beginning of 2024,” said Carsten Brzeski, global head of macro at ING.
“As affordability remains at low levels and prices in the construction sector remain elevated, we do not expect a strong rebound in demand for new housing.”
Furthermore, the discrepancy between supply and demand poses challenges for policymakers and stakeholders in the housing sector.
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