Acting correctly as real estate buyers and sellers in times of the interest rate turnaround

Resource bottlenecks, sentiment, interest rate turnaround: How will the real estate market develop in Germany?

A look at the current situation on the German real estate market reveals a complex field of tension of different factors: After a clear sellers' market was considered established for many years, both demand and supply are currently recording a certain decline. Specifically, the number of residential properties sold in May 2022 was only about half of the previous five-year average, for which a number of reasons are responsible. While Interest rates rise and Inflation are causing an initial drop in demand, fewer properties are being offered for sale at the same time, as the new construction sector is struggling with with tradesmen working at full capacity as well as Shortage of raw materials and property owners are reluctant to buy in view of the geopolitical developments are positioning themselves rather cautiously.

In addition to the current decline in transactions, our real estate agents do not believe that these trends are currently causing any significant changes in value no significant changes in the value of real estate on the contrary, Engel & Völkers is currently observing that the price level is stabilising for the time being, with lower market dynamics overall. The following two sections describe how you can best deal with the current situation, both as an owner with the intention to sell and as a prospective buyer of a house or flat in Germany.

Should you buy a property at the present time despite higher interest rates?

If you are considering Purchase a property for an exemplary property loan of 500,000 euros with full financing is currently charging around 3.5% interest, whereas in September 2021 around 1% was still the norm. In this scenario, the monthly instalment with 2% repayment would thus increase from 1,250 euros to 2,300 euros - a not insignificant additional amount.

However, a positive component of this development is that, other things being equal, the identical loan would be paid off about 10 years earlier due to the annuity structure with a higher interest rate.

According to ECB chief Lagarde's assessment, a return to the familiar low interest rate level is not in sight in the coming years foreseeable in the coming yearsthis is why our real estate agents do not recommend waiting for an unlikely, significant reduction in financing conditions. Especially those who have been dreaming of owning their own flat or house for a long time should also, but not exclusively, consider a property as an investment, but also as an emotional investment emotional and functional value value of such an object. Ultimately, financing remains the means to the end of the actual property purchase: with professional guidance, an appropriately calculated loan that fits your overall budget, and the right property, you can still achieve a satisfactory and sustainable purchase decision decision.

The real estate agent teams of Engel & Völkers in Germany will be happy to advise you on your individual ideas in order to identify suitable offers on the market together with you.

Tip for home loan savers: Those who have completed the savings phase of a building society contract benefit from the still very favourable building society loans, which continue to be offered at an interest rate of around 1%. So it may be worthwhile to take a look at previously concluded contracts.

What do the interest rate turnaround and the market situation mean for real estate sellers in Germany?

Also Owners are now faced with a changed starting position: Again and again, our real estate agents are asked whether the time is right for the Sale of a house or Flat is at all promising against the background of the interest rate turnaround.

According to a survey conducted by Engel & Völkers at the beginning of 2022 80% of respondents in Germany still expressed a fundamental desire To acquire real estate to acquire real estate. In all likelihood, there will therefore be no shortage of potential buyers.

With regard to the turnaround in interest rates, the historical comparison that the current interest rate level is still not in the extreme range. The rise to 3% to 4% initially seems immense - coming from a period of zero or negative interest rates. But in comparison with the 1990s, when 8% and more interest were not uncommon when taking out a property loan, the current conditions are still considered moderate moderate moderate. Since real estate was also successfully sold and profits were made under these conditions 30 years ago, the current scenario need not be seen as a reason for passivity either.

On the contraryeven if demand no longer reaches the record levels of past years, with a little patience during marketing, sales at very good conditions are still possible Sales at very good conditions are still can be realised. Especially with the professional support of a Real estate agentwho knows the local peculiarities and developments in your area, there is currently little to be said for further delaying a planned property sale - especially as the significant increases in value of the recent past can no longer be expected. Engel & Völkers will be pleased to take a closer look at your specific property situation and, in close consultation with you, develop a target-oriented marketing strategywhich will specifically transfer the strengths of your house or flat into the best possible sales result. Contact us!

Real estate today and in the future: Well positioned in every respect with Engel & Völkers

In summary, the following principles can be applied to both buyers and sellers of real estate in Germany in the context of the interest rate turnaround Principles which you should take into account in an upcoming real estate transaction:

1. Remain relaxed in the face of the new situation relaxed. Avoid rash, emotional or ill-considered decisions.

2. Maintain your Readiness to make decisions. Despite current uncertainties in the market, only active action will bring you closer to your set goal. Correct timing and rational action pay off.

3. Rely on solid Preparation. Appropriate cost/price calculations, professional advice and a careful approach are the key to success.

On the basis of these principles, together with Engel & Völkers you will realise a successful and holistically satisfactory real estate project. If you would like to find out more about our services at the various locations within Germany, we look forward to receiving your contact enquiry via our intuitive online form!