Property prices will probably rise again in 2025
For two years, the prices of apartments and houses have been falling, but this trend could now be coming to an end: In the coming year, a price reversal is threatened - real estate will become more expensive again, predict the Volks- and Raiffeisen banks. To counter this, new construction must be urgently increased.
According to the assessment of the Volks- and Raiffeisen banks, real estate in Germany will slowly become more expensive again in the coming year. After significant price declines in the previous and current years, a slight increase in prices of one percent is expected for the first time in 2025, according to the current real estate forecast of the cooperative financial group BVR.
"We see that prices are slowly stabilizing and not falling further, especially because the housing shortage is continuing to increase," says BVR President Marija Kolak. New housing construction must be urgently increased again. This requires better promotion, simpler building and planning regulations, and reduced real estate transfer tax for self-users.
According to the BVR analysis, the prices of houses and apartments fell by an average of 4.5 percent last year. The declines were particularly high in regions that had experienced exceptionally strong increases in previous years, mainly in metropolitan areas. In the current year, the model for the overall market even shows a minus of six percent, with sellers holding back their offers. Although the price adjustment of these properties is delayed, it will not be completely absent.
Demand collapsed due to inflation
The price decline was triggered by high inflation due to the attack on Ukraine and subsequent interest rate hikes by the European Central Bank. Fewer and fewer people could afford their own property, and the previously booming demand collapsed. This also brakes the urgently needed energy renovations in existing buildings, as renovations often go hand in hand with a change of ownership, according to the BVR analysis.
The Volks- and Raiffeisen banks expect a slow recovery of the market from 2025. If inflation continues to decline as expected and the ECB continues to ease its monetary policy, fundamental demand for real estate will reassert itself - albeit with a more subdued dynamics compared to the boom years.
The price increase prediction for apartments, along with houses, in 2025 by the BVR suggests that living costs in apartments might become more expensive. To counteract this, it's crucial to increase new housing construction, as suggested by BVR President Marija Kolak.
