According to a study, after the slump last year, the German real estate market is declining even more this year. Based on the deals registered in the first half of the year, the Hamburg Gewos Institute only expects around 591,800 purchase cases.

That would be almost a quarter fewer deals than in the already weak year 2022 and the lowest value since the all-German time series began in 1995. The nationwide sales volume is expected to fall by 29.1 percent to around 198.1 billion euros. The institute announced that sales and case numbers were the largest declines ever measured.

This year, the consequences of the rise in interest rates will be more evident than in 2022, explained Gewos expert Sebastian Wunsch. The moderate decline in purchase prices so far cannot come close to compensating for the increase in financing costs. Buying property is becoming increasingly difficult for owner-occupiers as financing costs rise and high inflation reduces purchasing power. Investors, on the other hand, waited out of uncertainty.

Pronounced reluctance to buy

Wunsch emphasized: “The current market situation is still characterized by a pronounced reluctance to buy. We currently do not see any significant changes in the market-determining factors for the rest of the year.”

The inflation rate is far away from the central banks’ targets, so no relief in interest rates is to be expected in the medium term. Purchase prices are expected to stabilize at the end of the year because they are currently falling more slowly.

For the study, Gewos analyzed nationwide data on property purchase contracts concluded with expert committees and the associated sales.

According to the survey, in 2022 real estate sales collapsed to 279.4 billion euros – a decline of 17.2 percent compared to the record year 2021 and the abrupt end of a long-term boom. The number of transaction cases fell by 16.1 percent to 787,700 over the year.