By Jonathan Cable
LONDON (Reuters) – Growth in overvalued real estate in the German real estate market appears set to slow in the coming years, but bargaining will worsen as supply cuts keep values high, offsetting the negative impact of tighter monetary policy, a Reuters poll found.
After rising by around 10.0% this year, prices will rise by 6.0% next year, up 4.0% in 2023 and 2.0% in 2024, according to an average estimate by 11 real estate market experts from 18 to 29 November.
But respondents unanimously said that availability would worsen over the next two to three years.
“The constant rise in prices, especially in metropolitan areas, will increasingly exclude a proportion of the German population from owner-occupied housing,” said Sebastian Schnejdar of BayernLB.
Asked what would help improve comfort, respondents cited tax deductions, higher wages, a faster pace of construction, and reduced legislation, among other things.
“To improve availability, real estate prices should go down or wages should go up faster than real estate prices,” Carsten Brzesky told ING.
“In addition, a drop in mortgage interest rates would improve the bargain.”
Like its members, the European Central Bank lowered interest rates during the coronavirus pandemic and a separate Reuters survey said it would not increase borrowing costs until at least 2024, when it would end its emergency asset purchase program.
Eurozone inflation is above the Bank’s 2% target and Germany’s largest economy rose to 6.0% in November – the highest rate since the EU harmonized series began in January 1997 – official figures showed on Monday. .
Isabel Schnabel, a member of the ECB’s board and German economist, said earlier this month that the Bank’s policy cannot ignore the fact that the rise in real estate prices has led to an overvaluation that could be dangerous.
Answering a question about the level of house prices on a scale of 1 to 10, from very cheap to very expensive, the median of the answer was 8.
“The verdict is twofold: in metropolitan areas and their neighborhoods, prices have been very high at 8-9, but rural areas, which continue to regain importance in the face of remote work, are still cheaper,” Florian said. Neumeier at Interhypen.
Market watchers surveyed were divided according to what would have the biggest impact on the German housing market next year, with seven supply cuts and seven higher interest rates or a tighter monetary policy. Some chose both.
“The desire for more property, smaller house sizes, etc. continues to generate more demand. Higher interest rates, inflation and stricter monetary policies are reducing demand,” Peer Hessemer told VON POLL Real Estate.
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