Comeback of existing properties?

In the past, when investors had a choice between a newly built property and an existing property, the choice usually fell on the new construction. That has changed. New construction in Germany has been in crisis not only since the start of the war in Ukraine. Shortages of materials, increases in construction costs and the explosion in energy costs make new construction projects difficult to calculate. More and more real estate experts now suspect a comeback of the old building.

What impact will this have on prices?

Calculated on the price per square meter, a new building is more expensive than an old building. But it was not only government incentives such as the KfW Efficiency House 55 that nevertheless made new construction the first choice for many buyers. Modern energy efficiency, free choice of equipment and contemporary floor plans also increased the attractiveness. Until the Ukraine war began.

Construction projects already became 15 percent more expensive within one year during the Corona crisis. But with Russia’s attack on Ukraine, prices have continued to rise. Meanwhile, three-quarters of construction companies are suffering from delays in new construction. 35 percent even had to accept order cancellations in May.

Is the comeback of existing properties coming now?

According to figures from the Federal Statistical Office, fewer homes were built in Germany than in the previous year for the first time since 2011. In 2021, only 293,393 homes were completed. The federal government had planned 400,000.

Because many new construction projects will either be discontinued in the future or increase significantly in price, a comeback of existing properties is quite possible. Even the increasing pressure on owners to renovate their properties to make them more energy-efficient will not change this. The high costs of climate protection measures are largely cushioned by government subsidy programs.

The federal government’s focus is on stockpile upgrades. New subsidies are therefore likely to focus primarily on modernizing the old housing stock in Germany. However, prices for existing properties will not rise drastically as a result. This is because potential buyers will look even more closely at a property and its need for renovation in the future. As a result, exaggerated price demands on the seller side have less and less chance of being realized.

More and more real estate agents are finding that the price expectations of sellers and buyers no longer match. Many owners now realize that they have already missed the peak of the market. This easing in real estate prices will continue to be supported in the coming months by ever-rising construction interest rates. Because fewer and fewer people who are willing to buy can still afford a property. Banks are already demanding more and more equity up front. This is already putting a noticeable brake on demand and putting pressure on prices. Also for existing properties.

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