Germany house price inflation to slow as borrowing and living costs rise – Reuters poll | Investment News
By Zuzanna Szymanska and Jonathan Cable
BERLIN/LONDON (Reuters) – Property prices in Germany will rise faster this year than thought just three months ago, as tight supply outweighs a worsening housing crisis. cost of living and the prospect of higher interest rates, according to a Reuters poll.
However, the resulting compression of disposable incomes should contain the rise in house prices over the next two years.
House prices are expected to rise 7.0% this year, according to median forecasts from 13 analysts surveyed May 11-25, with the pace slowing to 3.0% in 2023 and 2.0% in 2024. In a survey of March, these respective forecasts were 6.3%, 4.5% and 2.8%.
“House prices will continue to rise, albeit at a slower pace, as rising interest rates, soaring prices over the past few years and falling disposable income undermine affordability,” he said. said Carsten Brzeski at ING.
The European Central Bank is expected to raise rates for the first time in more than a decade in July and on Tuesday ECB President Christine Lagarde hinted at a hike of at least 50 basis points by the end september. [ECILT/EU]
Like much of the world, Germany has seen a price spike, with inflation hitting its highest level in more than four decades in April, driven by soaring fuel and energy prices following the Russia’s invasion of Ukraine.
Of the 13 respondents who answered additional questions about affordability, all conditions are expected to deteriorate for both first-time home buyers and the rental market.
Of those 13, ten saw affordability deteriorate significantly for first-time home buyers and four for renters.
“It’s the worst of all worlds: house prices still rising, interest rates rising rapidly, construction delays due to the scarcity of skilled labour, reduced purchasing power in due to high inflation,” said Timo Klein of S&P Global.
Klein said he also expects rents to rise due to reduced construction activity, landlords trying to stay ahead of inflation and additional demand from Ukrainian refugees. .
Asked where the ECB deposit rate, currently -0.50%, should go to significantly cool property market activity, the median response was 1.00%, a level not expected before 2024 according to another Reuters poll.
But one respondent, Marco Wagner, senior economist at Commerzbank, said 0.00%, a level expected for late September.
“Basically, every rate hike will do and contribute to a slowdown in rising prices,” he said.
(For more stories from Reuters Quarterly Housing Market Surveys:)
(Reporting by Zuzanna Szymanska and Jonathan Cable; Polling by Sarupya Ganguly and Milounee Purohit; Editing by Tomasz Janowski)
Copyright 2022 Thomson Reuters.