Rising Interest Rates Big Concern for German Luxury Property Market
Across Germany’s large cities, higher mortgage rates have reduced what people can afford to pay for homes, but sellers remain reluctant to drop their prices. The result is a stand-off and a slump in housing market sales, as many luxury homes languish unsold on the market. In November, the number of homes for sale for more than €500,000 on Germany’s top property portals that had been listed for more than 60 days was double the level of a year earlier. Only 2,260 homes were sold in Berlin between October and December, down from 4,013 a year earlier, according to government data. During that time, the average 10-year fixed mortgage rate increased significantly. It had been 1 per cent at the start of 2022, but stood at 3.96 per cent at the start of March. House prices were already falling: down 2.5 per cent in the second half of 2022 — the biggest six-month drop in more than 20 years. Between the first quarter of 2010 and the second quarter of 2022 home prices had increased by 107 per cent. In Munich’s central Ludwigsvorstadt-Isarvorstadt district — an area perched below the city’s historic Old Town, taking in the desirable quarters of Glockenbachviertel and Schlachthofviertel, that are well stocked with large villas — average listing prices fell 11.5 per cent in the last three months of the year, compared with three months earlier. Further from the city centre, Germany’s richest buyers have long been drawn to Bogenhausen, Munich’s quiet north-easterly borough — where high stone walls conceal sprawling private gardens belonging to large detached homes, costing €5mn and more. In Hamburg’s upscale Rotherbaum district, where Tudor-style detached homes look out on to Außenalster, the larger of the city’s two artificial lakes, listing prices fell 9.9 per cent in the last three months of the year, compared with the three months earlier. In Berlin, some prices have been cut drastically. Many of the city’s luxury homes — which had an average listing price of €3.45mn in the last three months of 2022 are located in Mitte, the city’s historical centre, or jostle for space between the stylish restaurants and celebrated museums of Charlottenburg. Sales of these have slowed to a trickle, though and the few that are selling are going for discounts of up to 30 per cent on the initial listing price. Germany’s luxury estate agents and mortgage brokers describe a market that has seized, with buyers pulling out as higher mortgage rates make purchases unaffordable, or delaying transactions, believing prices have further to fall. In recent years, much of Berlin’s luxury market had been driven by those minted from the city’s thriving start-up scene or working in finance, media or law. Today, these affluent working professionals are pulling back from purchases, meaning Yaprak relies much more on family offices and very rich families for business. Foreign buyers in Germany remain rare, since international investors favour other cities, such as London, Paris and Lisbon, for their European home purchases. Buyers who remain committed to a purchase have become more discerning, keen to drive a hard bargain with sellers, avoiding all but the best homes, and expecting significant price discounts.