The real estate market in Germany is tense, purchase prices are currently falling slightly. Nevertheless, the price rigidity could soon be overcome. Real estate experts are anticipating upward movements on the market as early as next year.

Higher interest rates, high inflation, weak economy: Real estate prices in Germany are falling again for the first time in years. In a recent study, DZ-Bank expected prices to fall by four to six percent in 2023.

Nevertheless, the price rigidity could soon be overcome, says Dunja Nigrin from the real estate service provider JLL to the “Handelsblatt”. From the second half of 2023, she expects slow upward movements on the real estate market.

Nigrin predicts that commercial areas such as sustainable office properties, logistics or hotels would initially benefit from this. However, the private real estate market would continue to weaken, said JLL expert Timo Wagner of the newspaper. “Unlike institutional investors, private market participants find it much more difficult to make and accept price corrections because they act more emotionally.”

Nevertheless, there are also clear differences here: While new buildings and renovated old buildings were not affected by the price reductions, it was much more difficult for sellers of unrenovated stock. However, the experts do not expect a drastic slump in real estate prices because the demand for living space remains high.

Although there is a lack of housing, especially in the metropolitan areas, the current economic situation is leading to cancellations in the construction sector. According to the Ifo Institute, 16.7 percent of construction companies were affected by cancellations in November, after 14.5 percent in the previous month. The main reasons for this are the increased construction costs and the significantly higher interest rates on loans of between four and five percent. According to the Handelsblatt, one square meter of new construction would have to be calculated by investors at 8,000 euros for a sale to be worthwhile at all.