German housing market prices rise to ease but affordability deteriorates: Reuters poll | Invest News

LONDON (Reuters) – Price growth in the overvalued German property market is expected to moderate in the coming years, but affordability will worsen as supply constraints keep values high, offsetting the impact negative monetary policy tightening, according to a Reuters poll.

After climbing around 10.0% this year, prices will rise 6.0% next year, 4.0% in 2023 and 2.0% in 2024, according to the median estimate of 11 experts of the real estate market polled by Reuters from November 18 to 29.

But respondents were unanimous in saying that affordability would worsen over the next two to three years.

“Continued price increases, especially in metropolitan areas, will exclude a growing proportion of the German population from owner-occupied housing,” said Sebastian Schnejdar of BayernLB.

When asked what would help improve affordability, respondents cited tax deductions, higher wages, a faster pace of construction, and reduced legislation, among others.

“To improve affordability, property prices should fall or wages should rise faster than property prices,” said Carsten Brzeski at ING.

“Plus, lower mortgage interest rates would improve affordability.”

Like its peers, the European Central Bank cut interest rates to an all-time high at the height of the coronavirus pandemic and although another Reuters poll said it should not increase borrowing costs before at least 2024, it will end its emergency asset purchase program.

Inflation in the eurozone is well above the Bank’s 2% target and in Germany, Europe’s largest economy, it jumped to 6.0% in November – the highest rate recorded since January 1997, when the EU harmonized series started – official data was released on Monday. .

ECB board member and German economist Isabel Schnabel said earlier this month that Bank policy cannot ignore a spike in house prices that has led to a potentially dangerous overvaluation.

In response to a question about the level of house prices on a scale of 1 to 10 ranging from extremely cheap to extremely expensive, the median response was 8.

“The judgment is twofold: in cities and their suburbs, prices have reached very high levels at 8-9, but rural areas, which continue to regain importance in the eye of teleworking, are even more affordable “, says Florian. Neumeier at Interhyp.

Market watchers polled were divided on what would have the most impact on the German property market next year, with seven choosing supply constraints and seven choosing higher interest rates or tighter monetary policy. Some have chosen both.

“The desire for more properties, smaller household sizes etc. continue to generate more demand. Higher interest rates, inflation and tighter monetary policy are dragging down demand,” Peer said. Hessemer of VON POLL Real Estate.

(Report by Jonathan Cable, survey by Mumal Rathore in Bengaluru and Michael Nienaber in Berlin, edited by Angus MacSwan)