Despite falling sales, Germany's real estate values balanced

Feb 7 | 2 minutes read
germany sales

According to the Gewos Institute for Urban, Regional, and Housing Research, the German real estate market's growth phase that lasted for over a decade might be reaching its end. The Institute forecasts that in 2022, the sales of apartments, houses, commercial properties, and land in Germany could decline by 7% (equivalent to €313.5 billion), and the number of transactions will drop below 900,000. Particularly, a reduction in the residential real estate sector is anticipated, which accounts for nearly 80% of all real estate-related transactions in Germany and is expected to drop by 5.6%. This would mark the first decrease in turnover in the German real estate market since 2009.


In 2021, the real estate sector saw a historic high in turnover, reaching an unprecedented €337 billion, double the amount of a decade prior. Despite a slight decline in total transactions caused by limited supply, prices for homes and apartments skyrocketed by a remarkable 13%, the highest since records began in 1980. Sebastian Wunsch, Head of Real Estate Economics at Gewos, attributes the exceptional performance of the real estate market in 2021 partially to its recovery from the COVID-19 pandemic crisis.


However, since May of 2022, there has been a consistent drop in the number of contracts for the purchase and sale of real estate, especially for deals of a sizable size.


This slowdown is attributed to several factors, such as;

  • Stricter purchasing conditions for both individual buyers and investors
  •  Higher inflation and loan interest rates
  •  Cautious stance among investors amidst market uncertainty


 Even while sales have dropped, home prices have held steady. As previously said, this is due to both the slow rate of new real estate development and the rising number of immigrants. Wunsch notes, "There are no signals of any price rate fall, let alone a dramatic drop," but adds that the total likelihood of a decrease should not be completely discounted on a regional level or in particular areas and sub-markets in Germany.


There is also an anticipated moderated rate of growth in German real estate prices this year, with projections putting the maximum increase at 3%.


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