Home prices in Germany's booming property market look set to rise sharply again in 2022 and, while the pace will ease in coming years, the increases will still outstrip general inflation, a Reuters poll found.
As in much of the world, many Germans spent most of the coronavirus pandemic working from home and those who could afford to move sought out larger, more expensive properties - fuelling home price rises.
Years of ultra-low borrowing costs have also made it cheaper for people to upsize or for first-time buyers to get onto the property ladder. Historically, the German housing market was dominated by renters but the desire for a safe-haven investment, along with speculators, has grown in recent years, adding to the property market boom.
European Central Bank board member Isabel Schnabel said in February the bank must consider surging house prices when assessing inflation.
Much of the polling was conducted before Russia's invasion of Ukraine, which could delay - or limit - any ECB considerations of tighter monetary policy. That in turn may support the housing market in the short term.
Home prices rose around 10% last year and were forecast to rise 6.3% this year, according to the Feb. 10-March 2 Reuters poll of 16 property market experts. That pace was expected to slow to 4.5% next year and then to 2.8% in 2024.
"House prices will continue to rise, albeit at a somewhat slower pace than in the previous years," said Carsten Brzeski, global head of macro at ING.
"Both the mismatch between supply and demand, currently fuelled by a stagnating supply, as well as high material and construction costs and the fight against climate change, for which energy-efficient housing plays a major role, will continue to drive house prices up in the coming years."
"The house price to income ratio is even higher than during the housing boom of the '90s, particularly in big cities," said Marco Wagner, senior economist at Commerzbank.
"To significantly slow down activity, a sharp rise in interest rates is required, which is not to be expected to this extent," said Pekka Sagner, economist for housing policy and property economics at the German Economic Institute.
