Status: July 2022
Energy costs are rising and rising, interest rates for long-term loans are also skyrocketing and the costs of building materials and labour are also getting higher and higher - these factors are the reasons why the mood on the German real estate market is deteriorating. This is shown by the values of the ZIA-IW Real Estate Sentiment Index (ISI). According to this, the property prices Berlin forecast could also indicate a stagnating or falling price trend. Due to the aforementioned inflation, it is becoming increasingly difficult for prospective buyers to purchase real estate. For owners willing to sell, the question arises as to the right time to sell a flat or house.
Sharply increased interest rates and overall costs are weakening demand among prospective buyers.
According to a survey by the Cologne Institute for Economic Research (IW) and the industry association ZIA (Zentraler Immobilien Ausschuss), real estate experts expect a slight decline in property prices in Germany. The steady increase of the last twelve years is likely to come to an end and end in a downward trend. The causes are to be found above all in the higher financing costs, especially since the construction interest rates for long-term loans have risen significantly in recent weeks. Added to this are the higher construction costs. Accordingly, property prices in Berlin could also stagnate or fall in the near future.
The downturn to be expected in Germany after years of steady upswing is likely to sooner or later also affect - property prices Berlin development. Signs of the worsening sentiment in the German real estate sector are provided in particular by the ZIA-IW Real Estate Sentiment Index (ISI), which slipped from 30.7 points to minus 5.5 points compared to the previous quarter and is thus negative for the first time since 2014. Expectations are much worse than during the Corona crisis. The index is based on a survey of executives from almost 1,200 real estate companies. The survey covered sentiment in the areas of residential real estate, office properties, retail real estate and project development.
The mood is particularly bad in the residential sector, where the index value has fallen from plus 22.6 to minus 19.5. The significantly higher construction interest rates mean that private individuals can afford condominiums and houses less and less. The effective interest rate for ten-year loans is now above three percent again for the first time since 2012. As a result, property prices in Berlin could also fall and demand for flats and houses is likely to decline.
Berlin property prices were and are very high in 2022, according to data from Statista.de. According to this, the asking price for Berlin condominiums averaged €5,315 per square metre of living space in the first three months of the year. This estimate is based on carefully selected property market data from more than 100 sources, including both the well-known major property portals and smaller, specialised platforms and print media. It includes flats across all construction years with an area of 60 to 80 square metres and upmarket furnishings.
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Despite the Corona pandemic, the Ukraine war, rising interest rates and high inflation, Berlin property prices are still on the rise in the third quarter of 2022. According to the Berlin Real Estate Report, this is particularly evident in the area of new buildings, where significant increases have been recorded. The growth in existing properties has already slowed down because project developers are confronted with high costs for building materials and energy. For these reasons, various projects are increasingly being postponed and the supply of new buildings is declining. The lower number of available new buildings and the higher construction costs lead to a situation in which potential buyers are increasingly looking for existing properties. This in turn causes prices for existing properties to rise. Added to this is the fact that Berlin's housing market is highly regulated and therefore fewer properties for sale and rent are offered on the market. This strengthens the position of property owners who are willing to sell.
Demand, in turn, is struggling with higher lending rates and the lower supply. However, private and institutional investors still have high liquid funds and also want to use these reserves to buy real estate. There are therefore investors willing to buy who can raise sufficient capital to purchase residential and commercial properties.
The property price forecast for Berlin is quite positive, even in times of rising inflation, although the price increases no longer affect all areas of the capital indiscriminately, but are more likely to be recorded selectively according to location. Criteria such as the condition of the building, the quality of the location and the development of rents are becoming increasingly important and are included in property valuations as factors relevant to decision-making.
Find a good time to sell and hire an estate agent
The property price forecast for Berlin varies from district to district: Some districts are developing positively and continue to show moderate price increases. In other districts, there is already a tendency for Berlin property prices to fall. Against the background of this complex - property prices Berlin development, it is advisable for owners willing to sell to commission a competent agent such as Bergen Real Estate with a property valuation and to act quickly in order not to miss the favourable time to sell. The German capital is and remains a safe and lucrative market for investors who wish to acquire real estate as an investment.