Demography is predictable
- Uncertainties due to the Ukraine war
- High Inflation
- Rising building interest rates
I think that these facts will not be the main reason for falling real estate prices.
The most significant factor for falling real estate prices will be the age structure in Germany. The Germans don’t like to live together with other (especially older) family members. From 1995 to 2015, so-called multigenerational homes declined by 40.5% 1. As an old person, if you can afford to continue living in the four walls you have built for yourself, you usually do so. Half of the single seniors live on 100 square meters in Germany2.
The “Kriegskinder” (eng. War-Childern, 1930-45) had many children between ≈ 1955 and ≈ 1970, this generation is called baby boomers. In Germany, this generation was slightly later than in other Western countries. The Baby Bommer peaked in Germany in 1964 as the highest birth rate in the Federal Republic of Germany.
Baby boomer children have demanded a lot of housing in recent years. However, the Baby Boomer children are slowly demanding less housing. From 2025 onwards it is predicted that the baby boomers will leave behind a lot of living space because they are (very) slowly starting to die3. That the living space suddenly becomes free is due to the fact that the generation has not reduced their living space (see top of page).
Immigration is very difficult to predict. But immigration is the reason why I am still optimistic about the overall real estate market in Germany. Of course, structurally weak regions that already have a high number of empty homes will face even greater difficulties in the future. In these regions, real estate prices will most certainly fall.
In structurally strong regions, we will not see a decline in the value of real estate, but we should no longer expect such high annual price increases from 2025 onwards (cf. last 12 years).