Declining immigration and inflated real estate prices

The state development bank KfW warns of excessive property prices in Germany. The decline in immigration and the increased supply of living space due to new buildings have meanwhile led to regional, speculative price exaggeration.

According to a report by “Welt am Sonntag”, the average price for residential property in Germany rose by almost 70 percent between 2004 and 2019 alone. From an economic point of view, however, this enormous increase is at least partially justifiable, since at the same time as the rise in property prices, disposable income has also increased by 41 percent. In addition, the building interest rate fell from 4.7 percent to 1.5 percent during this period. Due to these factors, real estate remained affordable despite the price increase. Now, however, it is “speculation to bet on further increases in house prices and rents in already expensive cities. Instead, it would be advisable to factor in possible declines, ”said the institute according to“ Welt am Sonntag ”.

There is no immigration from abroad

Between 2004 and 2019, immigration from abroad ensured that the physical demand for housing continued to grow, but now that trend is declining. “In view of this outlook, there are indications of regional speculative price exaggerations, namely where the increases go well beyond what would be justified by the interest rate cuts and rent increases,” says the analysis.

This development can be observed particularly in large and medium-sized cities. Prices there have risen particularly sharply in recent years. These include Berlin, Frankfurt am Main, Munich and Stuttgart. “In these cities there could be more or less sharp price drops,” it continues. “But not only there: real estate prices could also drop significantly in structurally weak regions” – depending on the regional demand for housing, according to KfW economists. “Buying a residential property mainly in the expectation that it can be sold again at a later point in time at a higher price – that will no longer necessarily work everywhere”, KfW chief economist Köhler-Geib told the newspaper.

Image Sources: HQuality /


Related Articles

Back to top button