The race upwards on the German housing market continues: new figures show that house prices increased once again in the first quarter of 2022. However, experts are seeing signs that the price rises could soon run out of momentum. 

House prices rise more than 10 percent for fourth consecutive quarter

The cost of buying a house in Germany rose once again at the beginning of the year. Figures from the Federal Statistical Office (Destatis) show that the average house price between January and March 2022, excluding taxes and other fees, rose by an average of 12 percent compared to the same period of the previous year. 

“This means that the rate of increase in the house price index was over 10 percent for the fourth time in a row,” the statisticians wrote. At the end of 2021, the year-on-year house price increase was 12,2 percent compared to the end of 2020, following previous annual rises of 12 percent and 10,9 percent.

Price increases gradually slowing down in Germany

However, there are some signs that a downturn could be on the horizon. Comparing quarter-on-quarter prices, Destatis found that prices for apartments and houses in Germany only rose by around 0,8 percent at the beginning of 2022, down from 3,1 percent in the fourth quarter of 2021 and 4,1 percent in the third quarter. “This indicates a slight weakening of the momentum,” Destatis concluded. 

The recent sharp rise in interest rates is currently making mortgages more expensive and dampening demand for real estate. According to the online portal Immoscout24, demand for housing fell by 17 percent in the first quarter of 2022, compared to the same period in 2021. Real estate agents are noticing that housing listings are remaining live for longer, and it is becoming harder to find buyers. 

Experts believe house prices could soon fall due to rising interest rates

“These developments could have a dampening effect on price developments in the medium term,” said ImmoScout24 Managing Director Gesa Crockford. The Landesbank LBBW recently predicted that house prices would fall in Germany if interest rates continue to rise while the economy stagnates. Their experts say we could be looking at price drops of as much as 20 to 25 percent. 

Nonetheless, demand on the housing market currently remains well above the level recorded at the end of 2019, prior to the coronavirus crisis.