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German Home Price Data According to trends in regional demand!

Rating Fitch London-12 February 2021: German home price data for 2020 is consistent with our opinion that Covid-19 will trigger a certain demand to move into suburban areas without causing price declines in large cities, says Fitch Ratings. In addition, efforts made by the authorities to ease market pressure in sought-after locations could influence prices in order to improve the long-term attractiveness of rural areas. شراء

Home prices in German cities with more than 100,000 inhabitants increased 5 percent last year, according to Bulwiengesa research and consulting company. Prices in major urban centers such as Berlin, Frankfurt, Munich, Hamburg, Cologne, Dusseldorf, Leipzig, Dresden, Stuttgart and Freiburg have most increased. Apartment prices increased by 7.7% on average in these 10 cities, and housing prices by 8.3%.

Prices were up by 5 percent due to demand in metropolitan areas that were beyond supply and the availability of cheap mortgage loans. Prices in cities closer to 10 major urban centres, with house prices rose by 4,6 percent and house prices by 4,9 percent, were more distant cities (versus 3.9 percent and 4.7 percent , respectively).

This corresponds to a recent market change towards the medium-sized cities of Germany, in response to affordability strains in the richest metropolitan areas. This has been helped by the comprehensive transport network in the country that allows commuting from smaller to larger cities. There are evidence that remote work during the pandemic has encouraged workers to abandon major city centers in neighboring urban areas for more affordable buildings. Recently, vacancy rates have decreased, and online searches have shown a growing interest in these places (not rural), according to ImmoScout24, anecdotal evidence from brokers.

According to the Cologne Institute of Economic Research, prices are not expected to fall in major German towns, where building still only meets around 70% of the house demand. National prices are projected to increase by 1%-3% in 2021, as the recession reflects the effect of the pandemic on household income. This could however be mild as the government extends better access to the short-term job system by the end of 2021. There is likely to be little pressure on the prices resulting from repossessed property sales.

Efforts to increase supply in and around major urban centers and to support rural livelihoods may also lead to regional price changes. Measures include the amendment of the legislation to impose vacant land buildings; potential limits on selling property to occupants; and expanding the high-speed internet to rural areas. States and cities have acted – Hamburg, for example, has banned the building of single-family homes for multi-family housing.

The success of these measures would partly rely on the capacity of companies to raise supplies. Other interventions could partially compensate them, including the distribution of broker fees between buyers and sellers in order to minimize purchaser costs.

Fitch ratings The German RMBS is backed by universal banks mortgages and has small to no regional concentrations. In certain transactions, exposure to weaker regions is limited. Originators prefer to take into account possible regional price differences, for instance by tighter LTV limitations in less favorable regions.

Fitch-rated residential loans Cover pools of the Pfandbrief programs have low LTV, on average 51% (at December 2020), and are dependent on collateral mortgage loan value. A further hedge against asset value decreases is the existing gap of up to 20 percent between market and mortgage lending rates. Given the geographical emphasis identified by Sparkasse issuers, we apply additional stresses to their regional concentrated pools in setting loss rates.

Our regional prices decreased, including clear assumptions for Munich, Frankfurt, Cologne, Hamburg, Dusseldorf, Stuttgart and Berlin, are responsible for price fluctuations. We consider conservative our market value decline (MVD) assumptions. As an example, for Munich and Frankfurt, our 'Bsf' MVD assumptions effectively reverse price increases of the past decade.

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