German house prices – no boom after correction has ended

Residential real estate prices in Germany have recently risen again, ...

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Dr. Jörg Krämer, Bernd Weidensteiner

Commerzbank Economic Research

08/30/2024

... and an increasing number of transactions and stronger demand for mortgage loans suggest that the price correction is over. However, prices are likely to rise only moderately for the time being. This is because there is no sign of a significant fall in mortgage interest rates and the increasing shortage of housing is likely to push prices up only moderately.

Price correction seems to be over, ...

as the price correction on the German real estate market triggered by the ECB's massive interest rate hikes come to an end? At least prices for existing properties have risen again slightly since the start of the year, after previously falling by more than 12% since spring 2022.[1] This would mean that the price correction has ended sooner than we had expected. We had previously assumed that prices would continue to fall slightly until the end of this year. This is because real estate – based on model estimates and in relation to economic fundamentals – is still around 5% to 10% overvalued.

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