Real estate prices rise in all segments: Analysis and outlook

Property prices in Germany are rising across all segments. Both existing properties built before 1990 and newer properties (built after 2010) experienced a price increase of 1.2% in the last quarter. The increase is particularly striking for apartments, which rose by 1.6 percent, while prices for houses rose by 1 percent.

According to Interhyp, a leading provider of residential mortgages, the price development observed at the beginning of the year has intensified into a clear trend. The company forecasts that real estate prices will continue to rise over the course of the year due to continued high demand. Interhyp therefore advises against waiting for prices to fall, as this seems unlikely.

Other mortgage ratios such as the average fixed interest rate and the initial repayment rate also point to a stabilization of the market. The fixed interest rate remained stable compared to the previous quarter at 11.8 years, and the repayment rate is almost unchanged at 2.3%. This stability signals improved affordability for buyers. Current interest rates have leveled off between 3.5 and 4 percent. Despite a slight increase, property prices remain below their previous highs and there is still a wide range of attractive properties on offer, which, according to Interhyp, creates a favorable environment for property purchases.

Positive developments in real estate financing: Savings banks record growth

The savings banks in Baden-Württemberg report a positive development in the area of real estate financing. In the first six months of the current year, new business in residential construction rose by almost 23 percent to around 5.3 billion euros, according to the Baden-Württemberg Savings Banks Association. This represents an increase of 22.8 percent compared to the first half of 2023, when new business had fallen sharply due to higher interest rates.

Matthias Neth, President of the Savings Banks Association, explained that this increase is an indication that the market may have bottomed out, even if a full recovery is still to come. The last two years have been characterized by sharply rising interest rates, which have had a significant impact on the real estate market and the granting of loans.