Jonathan Cable

LONDON (Reuters – While prices in Germany’s highly valued property market will slow over the next few years, it is likely that affordability will increase as more supply constraint keeps values high, offset by a lower impact of tighter monetary policy.

Prices will increase 6.0% next year after soaring 10.0%, 4.0% and 2.0% respectively, according to the median estimates of 11 market professionals polled for Reuters Nov. 18-19.

Respondents were unanimous when they said affordability would decline over the next 2 to 3 years.

Sebastian Schnejdar from BayernLB stated, “The continued price increase in particular metropolitan areas will exclude an increasing percentage of the German populace from owner-occupied homes.”

Answers to the question of what could improve affordability included tax deductions as well as higher wages and faster building speeds, reduced legislation, and lower taxes.

Carsten Brzeski, ING: “To increase affordability real estate prices must come down”

“Additionally a drop in mortgage interest rates could improve affordability.”

Like its peers the European Central Bank cut interest rates to a record low at the height of the coronavirus pandemic and while a separate Reuters poll https://www.reuters.com/business/euro-zone-inflation-remain-above-ecbs-target-next-year-2021-11-12 said it was not expected to increase borrowing costs until at least 2024 it will end its emergency asset purchase programme.

Inflation in the euro zone is well above the Bank’s 2% target and in Germany https://www.reuters.com/markets/stocks/german-inflation-hits-highest-decades-increasing-pressure-ecb-2021-11-29, Europe’s largest economy, it jumped to 6.0% in November – the highest rate recorded since January 1997, when the EU-harmonised series began – official data showed on Monday.

ECB board member and German economist Isabel Schnabel https://www.reuters.com/article/ecb-policy-idUSKBN2HU22B said earlier this month Bank policy cannot ignore a surge in property prices that has led to a potentially dangerous overvaluation.

Answering a question regarding the price of a house on a scale 1-10 from very expensive to extremely expensive, the median reply was 8.

Interhyp’s Florian Neumeier stated that “The verdict is two-fold”: prices in urban areas have reached extremely high levels at 8-9 while rural areas are still affordable.

According to market watchers, there was a wide range of opinions on which factors would most impact the German housing market. Seven voted for supply limitations and seven opted for tighter monetary policies or higher interest rates. A few chose both.

“The demand for smaller homes and more property is increasing. continue to generate more demand. “Higher interest rates, higher inflation, and tighter monetary policy are reducing demand,” stated Peer Hessemer from VON POLL Real Estate.

(For more stories about the Reuters quarterly housing market polls, click here: