The market environment through 2022 resulted in strong residential price growth and sometimes market imbalance. Further increases in mortgage rates and persistent inflation are causing a reversal of the previous trend and a sharp decline in demand for residential property. For the first time in decades, effective home prices have fallen. At the same time, population growth, immigration and the resulting housing shortage are still supporting price levels. Price growth is expected to weaken further and the seller’s market will transition to a buyer’s market.
Turnaround in home ownership
Real estate experts agree: After a decade-long rise, real estate prices have peaked. The market for home ownership is currently undergoing a trend reversal triggered by the sharp rise in mortgage rates in 2022. While homeowners have benefited from historically low mortgage rates over the past decade, rates have more than doubled over the past year. This has resulted in buying being more expensive than renting in various regions, which has not been the case for 13 years. Overall, the annual financial outlay for home ownership is 47 percent higher than for a comparable rental property. This means paying a high property premium, which is now even higher than before.
Decline in demand accelerates price correction
Rising mortgage rates, persistent inflation and high costs have led to a sharp decline in demand for home ownership. Demand has by no means collapsed completely. After a boom triggered by the COVID 19 pandemic, demand has returned to its long-term average level.
The few prospective buyers will have more room to negotiate prices in some regions, which will accelerate the price correction. The differences between regions in the real estate market will continue to become more pronounced. In rural regions in particular, prices could come under greater pressure.
ESG has an impact on the selling price, purchase price
Price developments are broad-based, so that sustainability aspects are increasingly becoming a price-determining factor. It is expected that further legislation will be enacted to promote sustainability. For transactions, therefore, the degree of ESG compliance should be assessed to determine whether additional requirements need to be met and what effort is required to retrofit accordingly. The classification of a property as ESG-compliant could soon be considered a value-determining factor and thus have a significant impact on the sales price.
“ESG” stands for Environmental, Social and Governance.
The time of classic real estate brokerage is over
It is no longer enough for real estate companies, brokers and agencies to bring buyers and sellers together. It is important to understand the uncertainty and provide people with professional advice. Transparency and quality are just as important as flexibility.
All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.
