Real Estate News - October 2023

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October 2023

ECB refrains from further interest rate hikes for the time being

The European Central Bank has temporarily refrained from further interest rate hikes, leaving the current key rate of 4.5 percent in place.

ECB President Christine Lagarde had already indicated in the run-up to the announcement that further interest rate hikes might not be forthcoming for the time being. The inflation rate in the European Union, one of the main reasons for the initiated interest rate turnaround, has recently weakened significantly.

In contrast to the key interest rates, real estate loans are expected to continue to rise. Within just one six-month period, these have risen from below four percent to the current level of around 4.5 percent. However, many experts do not see any advantage in waiting for construction interest rates to fall and therefore postponing the purchase of real estate, as interest rates are more likely to rise further here and the five percent hurdle could soon fall, especially for long-term investments. Furthermore, real estate prices continue to decline due to rising interest rates. According to the German Federal Statistical Office, prices for residential real estate fell by an average of just under 10 percent year-on-year in the second quarter of 2023.

IVD study - recovery of the residential real estate market in 2024

The German Real Estate Association (IVD) has published a new study analyzing the current situation of the German real estate industry and housing market and forecasting future developments.

In the study, the IVD sees the development of the residential real estate market in 2023 as rather positive compared to the general mood. According to the study, the prices of energy-efficient houses and apartments have remained relatively stable. In addition, the experts of the IVD do not consider it sensible to wait for the current situation and to delay decisions to buy or sell for a long time. Even if the interest rate level remains stable for the time being after the current decisions of the ECB and does not rise further, it will not decrease again in the foreseeable future. In this respect, sellers should not count on property prices rising again and buyers should no longer expect heavy discounts, but should take advantage of an early purchase decision. According to IVD President Dirk Wohltorf, the time of the greatest price corrections is over.

In the coming year, the IVD expects real estate prices to move sideways by around 5 percent. The association does not anticipate renewed price increases until the key interest rate level falls again, but this is not expected to occur before the fourth quarter of 2024.

Social housing now also from the 3D printer

For several years now, 3D printers and their potential for research and business have been a much-discussed topic around the world. Development has progressed so far that the first publicly funded multi-family housing project in Germany is now being built using this innovative technology. In Lünen, North Rhine-Westphalia, components for the concrete social building are being produced by a 3D printer.

The Ministry of Home Affairs, Municipal Affairs, Building and Digitalization in North Rhine-Westphalia (MHKBG NRW) is granting project funding of 400,000 euros to Wohnungsbaugesellschaft (WBG) Lünen. In addition, around 1.3 million euros will be made available from the public housing development program. The total cost of the innovative construction project is around 1.9 million euros. The apartment building with a total living space of 430 square meters is scheduled for completion in October 2024.

Through innovative processes such as 3D printing construction, politicians and business leaders hope to counteract the declining number of social housing units in Germany. With its current project, WGB Lünen is committed to limiting the rent to a maximum of 6 euros per square meter and making it available to people with low income levels.

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