Since 2016 already, the European key interest rate has been in the zero range and brings favorable repayment terms to borrowers. As saving money in bank accounts becomes increasingly unattractive due to the low interest rate policy, many consumers in Germany choose real estate as a long-term investment. Missing capital can easily be increased by low interest loans. Accordingly, the analysis of the data from 2019 shows again a dynamic increase in consumer credit by private households. At 2,840 billion euros, the total loan volume was 4.8 percent above the previous year’s level. The Expert Panel agrees: Since the low interest rate phase will continue in 2020, the financing conditions for real estate will remain favourable. The demand for loans for housing is correspondingly high. This in turn drives prices up. Experts still do not expect the price trend on the real estate market to reverse. However, there are initial signs that price growth is slowing down, at least in some locations.
Home ownership in A-locations and surrounding areas is in demand
The Expert Panel Spring Report states though, that there will be no slowdown in price growth in places where supply cannot keep pace with demand. Since, above all, A-locations cannot provide enough building land to create sufficient new housing, building land gets more expensive and is driving up prices for owner-occupied apartments. In addition, the prices for construction services have risen sharply in recent years. For many prospective buyers, city apartments are therefore out of the budget. This in turn benefits the well-connected surrounding areas of major cities. Home ownership in rural areas is often a good compromise, especially for families. State subsidies such as the construction child benefit or special depreciations have not relived the market, according to ZIA. On the contrary – the financial incentives have only increased the demand for apartments and building land. In addition, measures such as the rental brake or the cap of rents in Berlin are slowing down investments in existing properties. From the perspective of the real estate industry, more effective measures would be if building authorities increased their staff and building applications could be processed more quickly. Reducing bureaucracy is also essential for the designation of new building land. In order to meet the demand for living space, the obstacles for builders – either private or commercial – needto be removed.
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