Investing in a home right now might prove to be a shrewd decision. - Considering Current Market Conditions, Purchasing a Home Could Prove advantageous
In a turmoil-laden year for the German real estate market, experts are now predicting a rebound in the second half. The underlying factors pushing this optimistic outlook include declining interest rates and rising property prices. Amidst market fluctuations, prospective buyers are being advised against delaying their decision due to interest rates.
Michael Voigtländer, a notable real estate economist from the IW employer-related research institute, advises that waiting for a better rate may not be the best strategy, especially as property prices continue to climb. Reinforcing this sentiment, Daniel Ritter, managing partner at real estate agency von Poll, stated at a Frankfurt event that "it doesn't get better than this."For the remainder of the year, analysts predict average construction interest rates of around 3.6 to 3.7 percent for a ten-year term.
In reaction to this positive interest rate forecast, the demand for real estate loans has spiked. Over the past quarter, banks have issued 24.4 billion euros in financing for houses and apartments – a 31.9 percent increase compared to the same period last year. This surge was particularly noticeable in multi-family homes, with a 51 percent hike in loans issued. Real estate portals, such as Immoscout24, have observed an upsurge in buying interest, with demand increasing by 14 to 16 percent.
Another motivating factor for potential buyers is the sharply rising rents. According to the Association of German Covered Bond Banks (VDP), new rental agreements for multi-family homes increased by 4.3 percent nationwide and 4.4 percent in metropolises within the last year. This upward trend has led many tenants to seriously consider home ownership.
Despite the appealing factors, questions still remain as to whether tenants can genuinely afford to make the leap into homeownership. With an average credit amount of 350,000 euros and a property purchase price of 395,000 euros, this translates to a loan-to-value ratio of 89 percent – notably high when considering the typical advice of having at least 20 to 30 percent equity for a real estate purchase. However, Lucie Lotzkat, managing partner at von Poll Finance, suggests that financing with low equity can still be feasible as long as there's a consistent monthly net income.
When considering home purchases, a crucial aspect currently is finding suitable properties, particularly in popular metropolises like Munich, Frankfurt, and Cologne, where prices tend to be higher and offerings are more limited. Nonetheless, experts believe that a favorable price-performance ratio can still be found in nearby communities within a 30-minute radius.
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Key Takeaways:- Real estate market recovering, causing a spike in demand for housing and mortgages;- Lower interest rates and rising property prices are making buying properties more attractive;- The increase in rents is pushing many tenants to consider purchasing homes;- Affordability remains a concern due to tight supply and increasing prices;- Economically viable to finance properties with low equity as long as there is a consistent monthly net income.
The community policy and personal-finance experts from the IW employer-related research institute and von Poll Finance suggest that, with lower interest rates and rising property prices in the German real estate market, now might be an opportune time for employment seekers considering homeownership, as financing with low equity can still be feasible if there's a consistent monthly net income. However, it's important to note that finding suitable properties, particularly in popular metropolises, can be challenging, and affordability remains a concern due to tight supply and increasing prices. In light of this information, investors might want to look into investing in real estate in nearby communities for a potentially favorable price-performance ratio.
