Jonathan Cable and Zuzanna Stzymanska

BERLIN/LONDON – German home prices are expected to rise more this year than was anticipated three months ago. This is because a shortage of supply outweighs a deeperening cost of life crisis and higher interest rates. A Reuters poll revealed.

The squeeze on disposable incomes will likely keep the property market from rising in the coming two years.

The median poll of 13 analysts found that house prices would rise 7.0% for this year. However, the rate is expected to slow to 3.0% by 2023 and 2.0% by 2024, according to an average forecast. According to a March poll, these forecasts were respectively 6.3%, 4.5%, and 2.8%.

According to Carsten Brzeski, ING, “House prices will continue rising, albeit slower, as higher interest rate, the increase in prices over recent years, and lower disposable income are undermining affordability.”

European Central Bank rates are expected to rise for the first-time in more than a decade this July. President Christine Lagarde of the ECB suggested on Tuesday that a rate increase would be at least 50 basis points before end September. [ECILT/EU]

Germany is like much of the rest of the world. The country has been experiencing runaway prices, with the inflation reaching its highest point in four decades in April. It was driven by the soaring fuel- and energy costs following Russia’s invasion.

The affordability question was answered by 13 people who responded to additional questions. They all expect conditions to get worse for first home buyers as well as the rental market.

Of the 13 mentioned, ten were affected by a significantly lower affordability rate for first-time buyers of a home and four saw renters experiencing a worsening rental market.

“It’s the worst of all worlds: Still-rising house prices, rapidly-increasing interest rates, building delays due to scarce skilled labour, reduced purchasing power owing to high inflation,” said Timo Klein at S&P Global (NYSE:).

Klein stated that he expected rents will rise due to lower building activity and landlords trying not to be outpaced by inflation.

The median response to a question about how high the ECB would raise its deposit rate (currently -0.5%) to substantially cool housing market activity was 1.00%. According to another Reuters poll, this level is not likely to be reached before 2024.

Marco Wagner (ETR: Senior economist, Commerzbank) was the only one to respond. He said that 0.00% is the level expected for September.

He stated that “Basically, every rate increase will do and contribute towards a slowdown in the price rises.”

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