Real Estate Purchase: Current Price Development and Demand in Germany

Real Estate Purchase: Current Price Development and Demand in Germany

Life of a human being - it provides security, security and is the place of action of one's own ideas and plans. These positive characteristics mean that home buying is almost inevitably perceived as a long-term goal. Many are willing to accept high hurdles and losses. The key factor here is real estate financing, which has been associated with low interest rates for a long time. So it's supposedly & ldquo; On the other hand, high demand also leads to rising real estate prices, which in turn make the whole venture more expensive. Experts are already talking about a real estate bubble at times, some metropolitan areas seem overheated. What's the point of the reports?

Real estate industry as the second largest economic sector in Germany

The importance of the real estate market becomes clear on the basis of the relevant transaction volume. The real estate investment market in Germany has recently risen significantly. While the transaction volume in 2004 was still around 21 billion euros, the statisticians recorded a record value of 79 billion euros for 2015 already. The numbers are based on the summarized data of the published transactions. The forecasts for 2016 foresee a small transaction volume of between 62 and 65 billion euros, which is still well above average in the long-term comparison.

The total is still divided into the commercial real estate submarket, which accounts for around 2/3 of the total market. These numbers initially suggest that significantly more objects were traded. However, a large part, experts estimate by about 2/3, due to higher house prices. Accordingly, there are not necessarily much more transactions, although the price level has increased significantly. There is also a lack of information on regions or specific types of housing that would allow differentiation. It becomes clear, however, that the brisk activity in the real estate market provides for a dynamic purchase price trend.

How did house prices in Germany change?

Pricing indices are particularly relevant for private investors, reflecting the development of house prices over a longer period of time , Such an index exists, it is based on data over a period of 15 years. Between the years 2000 and 2014, certain values ​​were calculated on the basis of data from the Federal Statistical Office, which included new buildings and old buildings in equal measure. The property values ​​are included as well. For 2010, an index of 100 has been set. Based on this, real estate prices rose steadily up to and including 2014. This year, an index value of 113.2 was found. In the previous year this was 110.4, in 2012 107.1 were calculated and in 2011 103.5 were used as an indicator.

Compared to previous years, ie the period from 2000 to 2010 inclusive, the general trend was rather slightly negative , The fluctuations from year to year were marginal, only from 2006 to 2007 could significant losses be documented. The reason for this, at least in macroeconomic terms, is likely to be the first effects of the looming global economic crisis.

What does this mean in practice?

The real estate market for real estate developers, in which residential real estate is represented, presents itself in a differentiated manner The situation is tense for top regions and their metropolitan areas. Even though new construction activity was relatively strong, it only partially cope with actual demand. Experts already speak of a supply gap. Only a few expect a continued sharp increase in rents, they see a trend reversal since 2013. In the analysis, a connection with significantly increased housing costs is often produced.

The more this cost block contributes to the total costs, the more obvious are the signs of migration to the more favorable peripheral areas or surrounding communities. The forecasts see significantly lower growth rates than in the years up to and including 2013. Of course, the economy also has an impact, especially in terms of inflation, gross domestic product and a further increase in private consumption.

Other factors that influence

A trend towards urbanization is clearly visible both globally and throughout Germany. & Bdquo; exodus & ldquo; For a long time, it has been a popular term to describe the attractiveness of the cheaper and natural living areas in the bacon belt of the metropolises. Added to this is the factor of over-aging, which requires care and short distances. Since small towns then show clear signs of migration, neighborhoods mix more and more. One- and two-person households are the most in demand, and they are also the focus of planning for new construction projects.

  • The situation is problematic in the regions of Germany, which are considered top regions. They offer many jobs, a high quality of life and high mobility. Trend quarters are emerging, which are experiencing an immensely stronger demand than other city areas. Even in cities such as Frankfurt am Main or Hamburg, there are certain areas where the vacancy rate is still high. Notwithstanding the fact that the overall market of these regions can by no means satisfy the general demand.
  • Conclusion and Concluding Remarks

The long-term lower loan interest rates lead to a sort of panic over the whole territory, which at times causes curious effects. Even within the top cities, wide rifts form between supposedly boring & ldquo; and & quot; trendy & ldquo; Neighborhoods. This creates a transparent, but not very meaningful picture of the actual price level in such areas. Mistakes are committed, the sheer competition for real estate ignores hard values. In view of the forecast that financing costs will increase over the next few years, even peripheral or real estate in need of renovation will be traded for maximum prices.

Statistical values ​​show how one-sided and therefore dangerous this development is. Purchase prices increasingly move away from the actual property value. So the value that is realistically given due to location, land and building fabric. Is modernized, it is almost exclusively high-quality renovations. The result is a gap, which leads to the surrounding residential areas in the maelstrom of price dynamics.

Summary

More and more studies point to a dangerous real estate boom in Germany. Experts speak of a stronger urbanity, which makes cities much more attractive. Significantly higher transaction volumes are in disproportionate relation to real demand on the real estate market in Germany.

Artikelbild: © Brian A Jackson / Shutterstock


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