# Germany home prices to sink nearly 6% this year – Reuters Poll
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-28
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: German Home Prices to Fall Sharply as Interest Rates Surge
Meta Description: Analysts predict significant fall in German home prices due to higher interest rates, leading to worsening rental affordability in urban areas.
URL: https://financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-pollhtml

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By Indradip Ghosh

BENGALURU (Reuters) – Home prices in Germany will fall more sharply this year and next than previously thought as higher interest rates dampen demand, according to analysts in a Reuters poll who said rental affordability in urban areas would worsen over the coming years.

Twin pressures from a high inflation-induced cost of living crisis alongside fast-rising interest rates have forced many Germans to forgo dreams of owning a home and instead continue in rented accommodation.

With the European Central [Bank expected to hike interest rates at least twice more in coming months and inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel") still running around 9%, that trend is unlikely to reverse soon.

Average home prices in Germany, Europe’s biggest economy, are forecast to decline 5.8% this year and 2.5% [next](https://www.financedigest.com/1-in-10-workers-considering-a-career-change-in-the-next-year.html "1 in 10 workers considering a career change in the next year") year, according to the Feb. 16-27 poll of 12 [property experts](https://www.financedigest.com/buy-to-let-expert-shares-5-predictions-for-uk-property-in-2018.html "Buy-to-let expert shares 5 predictions for UK property in 2018 "). That is more severe than [falls of 3.5% and 0.5% predicted three months](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors") ago.

If realised, it would be the first annual decline at least since official data started in 2016.

Asked how much average [house prices would fall](https://www.financedigest.com/buy-off-plan-to-beat-stalling-house-prices-and-falling-rental-yields-says-jean-liggett.html "“Buy off-plan to beat stalling house prices and falling rental yields” says Jean Liggett ") from peak to trough, the median response was 11.5%, more than the 10% predicted in November, with the steepest forecast at 20%.

As the current rate hike cycle is the most aggressive one since the start of the monetary union, it will take a while before the [housing market](https://www.financedigest.com/uk-housing-market-weakness-continues-improvement-on-the-horizon-rics.html "UK housing market weakness continues, improvement on the horizon – RICS") correction will bottom out. Also, the rebound after the bottoming out could be weaker than many currently think,” said Carsten Brzeski, [global head](https://www.financedigest.com/new-york-catches-up-with-london-to-head-citys-global-centres-survey.html "New York catches up with London to head City’s global centres survey") of macro at ING.

While we expect house [prices to fall](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase"), this will not be enough to improve affordability, given the increase in financing costs and the loss of real wages.

Nearly three-quarters of respondents, 8 of 11, said [home ownership would decrease over the next two to three years](https://www.financedigest.com/home-battery-sales-in-germany-may-surge-59-this-year-study.html "Home battery sales in Germany may surge 59% this year -study").

New residential construction is expected to decline over the coming year, according to a [report by the German](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report") Property Federation (ZIA), which noted the housing shortage was at its worst in 20 years.

That will add to [pressure on rental markets](https://www.financedigest.com/intracranial-pressure-monitors-market-is-set-for-a-potential-growth-worldwide.html "Intracranial Pressure Monitors Market is Set for a Potential Growth Worldwide"). [Rental prices were expected to increase](https://www.financedigest.com/4-tips-for-landlords-to-increase-rental-property-profits.html "4 Tips for Landlords to Increase Rental Property Profits") 3.5% this year and next and 4.0% in 2025, the latest Reuters survey showed.

A strong majority, 10 of 12, said [affordability in the urban home](https://www.financedigest.com/still-living-at-home-a-third-of-the-nation-cant-afford-to-rent.html "Still living at home? A third of the nation can’t afford to rent") rental market would worsen over the next two years.

[“Higher interest rates](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") forced a significant part of potential buyers out of the housing market…These potential buyers – with above average income – are now increasingly seeking rented apartments,” said Sebastian Schnejdar, senior [real estate](https://www.financedigest.com/gold-london-real-estate-and-the-theresa-may-effect.html "GOLD, LONDON REAL ESTATE AND THE THERESA MAY EFFECT") analyst at BayernLB.

In conjunction with increasing [housing shortages](https://www.financedigest.com/will-pdr-prove-the-saviour-for-the-uks-housing-shortage.html "Will PDR prove the saviour for the UK’s housing shortage?"), rents will rise significantly. Therefore affordability, especially in the urban [home rental markets](https://www.financedigest.com/the-new-fangled-normal-of-working-from-home-to-push-the-public-cloud-service-market.html "The “New-Fangled” Normal of “Working from Home” to Push the Public Cloud Service Market"), will significantly decline.

(For other stories from the [Reuters quarterly housing market polls:)](https://www.financedigest.com/global-2023-economic-view-downgraded-at-odds-with-market-optimism-reuters-poll.html "Global 2023 economic view downgraded, at odds with market optimism: Reuters poll")

(Reporting by Indradip Ghosh; Polling by Sarupya Ganguly and Prerana Bhat; Editing by Ross Finley and Christina Fincher)


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