If you want to build a new house today, you have to spend significantly more money than you did a year ago.
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(Photo: imago images/blickwinkel)
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München The increased mortgage rates and higher construction and material costs are becoming more and more of a problem for homebuyers. Roland Schmautz, Vice President of the Bavarian Savings Banks Association, says: “Many a dream can no longer be realized.”
If you are thinking about buying a property today, you can expect loan interest rates to be more than twice as high and construction costs to be 25 percent higher than in the previous year. Many customers therefore reacted in the first half of the year, after it was already foreseeable in December that interest rates for long-term real estate loans would rise significantly.
In the past few months, many people who want to build have taken the last phase of the building interest rates, which are cheap in a long-term comparison, with them. The 61 Bavarian savings banks lent a total of 7.7 billion euros in new loans for private housing construction in the first half of the year. That is 600 million euros or 8.5 percent more than in the same period last year.
The customers had a good reason for this: while real estate loans with a ten-year fixed interest rate were available for 0.7 percent at the best of times, the interest rate recently rose to more than three percent at times. “None of us have ever experienced anything like this,” says Schmautz.
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Demand for real estate loans falls
The consequences for the second half of the year are now becoming apparent. Ulrich Reuter, President of the Bavarian Savings Banks Association, assumes that demand for real estate loans will decrease. Also because the lending banks and savings banks are more restrictive when it comes to lending and, for example, require higher equity ratios.
In addition, the growing uncertainty caused by recession fears, in which concerns about jobs also play a role, is likely to reduce demand for loans for new builds. Instead, there could be more interest in smaller loans for renovations and conversions in the future.
The home ownership rate in Germany is one of the lowest in Europe.
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(Photo: Ingo Bartussek – stock.adobe.com)
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The home ownership rate in Germany, which according to the Federal Statistical Office is 42.1 percent, is likely to remain permanently at one of the lowest levels in Europe. “It is regrettable that in economically good times it was not possible to increase the home ownership rate in Germany,” says the President of the Savings Banks Association of Bavaria.
>> Read here: Up to 23,000 euros in additional costs per year: That’s how violently the increase in building interest hits real estate owners
With high inflation and the massive increase in energy prices, Reuter now sees more problems for customers: “The number of people who are still able to save will decrease significantly.”
This is also likely to have a significant impact on people’s retirement plans. Due to the rising cost of living, the possibility of building up an adequate pension is likely to decrease significantly.
Reuter says: “Zero percent interest with one to two percent inflation was better for customers than one percent interest with eight percent inflation.” The Bavarian savings banks do not expect inflation to fall to a level of two percent until 2024 at the earliest.
More: Turnaround in interest rates: This cost trap is now lurking when buying a home
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