– Low interest rates have made real estate financing cheap for years. This is another reason why the number of foreclosures has been falling for a long time. Experts are now expecting a trend reversal.
Despite the weak economy and sharp rises in interest rates, fewer properties have been foreclosed on in Germany. In the first half of the year, procedures were opened for 6248 objects Figures from the specialist publisher Argetra.
In the same period last year there were 6432 houses, apartments and land. However, the market value of the properties rose from 1.42 to 1.66 billion euros due to higher prices. In the first half of the year, many objects with a market value of over one million euros came under the hammer, especially in Berlin.
Experts see a turnaround for next year
The Argetra experts, who have analyzed the dates for foreclosures at almost 500 district courts in Germany, expect that soon more people will have to foreclose on real estate.
The number of foreclosures in Germany has been falling for years. The reasons are the long-standing good economy and low interest rates, which have kept the interest burden low for debtors and have driven demand for real estate. In addition, because of the corona pandemic, banks offered borrowers to defer payments instead of terminating loans and initiating foreclosures.
However, the Argetra experts believe that the situation is changing. “A weak economy, declining purchasing power and high inflation, with energy and rental prices in particular rising sharply, will lead to a significant increase in private bankruptcies in the current year,” they write. The number of foreclosures is likely to increase significantly in the coming year, since the processing times are long and the weak economy is only having a delayed impact.
Hardly affordable objects on the normal real estate market
There would also be higher interest rates. Many people did not manage to pay off their entire real estate loan at the agreed fixed interest rate during the term of the contract. “Follow-up financing through a new loan will then be significantly more expensive. Many home builders could be overwhelmed.” Interest rates have more than tripled since January, from 0.8 percent to around 3 percent most recently. Most recently, researchers at the German Institute for Economic Research had warned of more foreclosures due to the rise in interest rates.
Objects from foreclosures are considered coveted because there are hardly any affordable properties to be found on the normal market. According to Argetra, only about half of the foreclosure proceedings opened end in court. The other properties would be sold before then. According to Argetra, single and two-family houses and condominiums in particular were foreclosed on. On average, 15 out of 100,000 households in Germany were affected by foreclosures in the first half of the year. North Rhine-Westphalia has been at the forefront in terms of the number of foreclosures for years.
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