18/05/2022

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Top 4 Reasons Why the German House Prices Will Shoot up in the Next Years

Germany’s property sector has become much higher after five years of rapid price increases.

This is a major change in a world where the real estate market has traditionally been quite robust.

According to the polling and consultancy company Bulwiengesa, housing prices in German cities and towns with far more than 100,000 inhabitants increased by 5% last year.

Prices grew the most in big cities like Berlin, Frankfurt, Munich, Hamburg, Cologne, Düsseldorf, Leipzig, Dresden, Stuttgart, and Freiburg.

Housing prices in these ten cities increased by 7.7 percent on average, while house prices increased by 8.3 percent.

In Germany, residential areas are becoming increasingly scarce, and prices are the.

At first sight, these 11 terms may characterize the situation in Berlin’s housing market more or less accurately.

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With this, let’s look at some of the reasons why the prices in the housing market in Germany might continue to grow.

  1. Germany’s Silicon Valley.

A healthy and stable economy, demographic growth, housing scarcity, and a thriving IT sector all contribute to Berlin’s success.

Berlin, like other internationally renowned IT startup cities such as Toronto, London, and San Francisco, attracts 70% of Germany’s overall startups.

Location in cities with ample talent is essential for large companies in tech and science, and that is why Google, Samsung, and Pfizer are headquartered here.

This trend is driving up the market for office accommodation, like corporate offices.

Global buyers (from the United Kingdom, the United States, and Switzerland) account for 43 percent of purchases, with properties priced between 300,000 and 700,000 Euros.

The real estate industry saw an 8.5 percent increase in prices.

  1. Low building operation.

Another explanation for the continuing rise in home prices is a lack of construction activity.

Housing supply is falling short of meeting demand.

According to Destatis, housing permits increased by 3.8 percent year on year to 360,578 units in 2019, while household completion percentage increased by 2 percent year on year to 293,000 units.

Despite this, it is inadequate due to a growing urban population and a surge in refugees.

In the medium term, the country wants to develop about 400,000 apartments a year to avoid urban housing shortages.

Measures to improve supply in and around large urban areas and encourage rural living can often result in regional price differences.

Changes to the law to compel construction on vacant land are being considered, as are potential limits on renting residential properties to proprietors and the expansion of high-speed broadband to remote regions.

  1. Geopolitical position.

Regionally, Germany is fundamental to the European Union and Central Europe.

Despite Brexit and the global financial crisis, economists believe Germany is well prepared for more price and rent increases.

If it’s retail/office properties, single-family houses, or the multifamily market with condos and rentals, the figures continue to look promising for investors due to increasing prices.

Germany was one of the very few nations that escaped the 2008/2009 crisis comparatively untouched, which could give buyers more interest in purchasing property in its major cities.

Though Berlin’s growth is noteworthy, other major cities such as Frankfurt and Munich display a lot of potential as well, which automatically translates to rent price increases.

  1. Interest rates.

Although almost all German mortgage borrowers invest at lengthy interest rates that are higher than “tracker” rates.

Exceptionally low rates and inflation expectations have encouraged insistently rising demand.

According to JLL, property investment trading volumes in Germany increased by 7% annual growth to €20 billion (US$22.5 billion) in 2019.

It is the second-highest transaction amount recorded since reports started.

Conclusion.

Between 2008 and 2018, the price of housing in Germany rose by nearly 50%.

The final verdict on the Berlin housing market and residential condo housing is constrained.

Regardless of Brexit or world economic developments, Germany and Berlin tend to be in an excellent spot.

The fact that existing homes are driving the price surge indicates that hotspot cities with insufficient room for new development are still the major driver behind high prices.

So far, anticipation that the pandemic will delay or even counteract house price rise has not come to pass.

With record amounts of deposits, mostly amassed by wealthy customers, and low-interest rates, prices are likely to rise.