The cost of buying a house in Germany rose at break-neck speed once again in the third quarter of 2022. But there are signs that a slowdown on the housing market could be on the horizon.
House prices up 10,2 percent in Germany in Q3 2022
Average sale prices for houses and apartments in Germany rose by 10,2 percent in the second quarter of 2022 compared to the same quarter of the previous year. As the Federal Statistical Office (Destatis) reports, this is the fifth quarter in a row that the rate of increase has remained above 10 percent.
According to Destatis, prices are continuing to rise the quickest in rural regions, where house prices rose by 13,6 percent compared to the same quarter of the previous year. However, this doesn’t mean that prices aren’t rising in German cities as well: housing in the country’s biggest seven cities (Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf) cost an average of 12,2 percent more in the third quarter of 2022 compared to the previous year.
The price increase was the weakest in outer-city areas (e.g. commuter towns around large cities), with house sale prices up by “only” 7,8 percent compared to the previous year. This is the first time since the first quarter of 2021 that the rate has been in the single digits.
Increases slowing, but falling house prices unlikely
There are however some signs that the momentum on the housing market might be slowing. Destatis reported that price increases in both cities and rural regions were consistently weaker than in previous quarters, a conclusion backed up by a recent Immoscout24 report that showed that high interest rates were dampening applications for mortgages and therefore curbing demand.
A new report by the Gewos Institute for Urban, Regional and Housing Research recently concluded that, after a record year in 2021 that saw 337 billion euros' worth of real estate sales, turnover on the German market would decline in 2022 for the first time since 2009, SPIEGEL reports.
Sebastian Wunscsh, head of property analysis at Gewos, told SPIEGEL that the number of purchases and sales in Germany has been falling since May and that buying real estate is becoming increasingly difficult because high inflation is diminishing purchasing power while also increasing financing costs.
However, while Gewos expects demand to fall, it is for the time being ruling out huge price drops on the market. Instead, the institute expects the price increases for residential real estate to slow to around 3 percent, while modest regional price drops could be possible.