Five brokerage firms operating nationwide expect an increase in real estate supply in the coming years. However, experts do not predict a widespread wave of supply or blanket price reductions. One of the central conclusions of the first Real Estate Executive Circle, which took place at Homeday in Berlin, states that buyers currently have greater negotiation scope, though they cannot expect so-called bargains. FALC Immobilien, KENSINGTON Finest Properties International, McMakler, PlanetHome, and host Homeday participated in this discussion round. The current market situation in Germany, the development of construction loan interest rates, and specific challenges for brokerage companies were discussed. The format is intended for regular continuation.
The anticipated increase in supply is attributed by the brokerage firms to two main factors: firstly, properties financed during the low-interest rate phase whose fixed-interest periods expire in the next few years. Secondly, a predicted increase in sales from the so-called Baby Boomer generation. However, these developments are categorised as a gradual and long-term process, not a short-term market change. The expectation of some buyers for sharply falling prices is therefore considered unrealistic by the participants. Lennard Möhlenbrock, Director of Operations at KENSINGTON International, stated that about a third of German residential property belongs to Baby Boomers, and in certain cities such as Leipzig and Berlin, almost 80 percent. However, an alternative to the existing living situation, such as a smaller, barrier-free apartment in the same district, is rarely available. Therefore, the majority of owners remain in their existing properties, and a relevant increase in supply will only occur later through inheritances, spread over a period of two decades, particularly in regions with already low demand. The real test for refinancing the zero-interest years is expected around 2031; waiting for forced sales is currently not sensible.
Andreas Stolpe, CFO at McMakler, commented that a growing supply of older detached houses outside metropolitan areas will encounter lower purchasing power among young families. This could lead to selective price reductions in these segments, but not widespread price falls. In parallel, many older owners are moving to central locations where supply is already limited. The market is comprehensively realigning, but without collapsing as a whole.
There was agreement among participants regarding the significantly increased importance of energy efficiency. Many prospective buyers were hesitant about properties that might require major investments in the coming years, partly due to unclear future obligations. For sellers of older properties, the question arises whether renovation before sale makes sense or if it should be left to the buyer. Christopher Schnell, Managing Director and CSO of PlanetHome, emphasised that the energy condition has evolved from a secondary aspect to a primary price factor. He referred to significant price differences between energy efficiency classes, for example, a premium of almost 80 percent for apartments in classes A and A+ compared to class H. A seemingly inexpensive property could prove expensive if renovation needs are not considered. Investments in energy efficiency would pay off twice: in the future viability of the property and its marketability. The correct assessment of these correlations is an essential consulting service whose value is still too little recognised publicly.
Generally, with the increased interest rates, a buyer's market has established itself. This must be considered with regional differences, with a stronger presence in economically weaker areas compared to sought-after metropolitan regions. The participants of the circle agreed that buyers today tend to be able to wait longer and have an improved negotiating position compared to previous years. Stefan Nölker, Managing Director of FALC Immobilien, clarified that greater negotiation scope does not mean indiscriminately offering ten or twenty percent below the list price. Quality properties in good locations continue to retain their value. Prospective buyers with clarified financing, a comprehensive understanding of real estate, and quick decision-making ability often have a better negotiating position than those who merely want to drive down the price maximally.
Andreas Stolpe from McMakler added that buyers are as firmly in the saddle as they have not been for ten years. To effectively utilise this scope, pre-clarified financing as a trump card, precisely quantified renovation costs as a basis for negotiation, and the necessary patience to weigh alternatives are required. One of the brokers' tasks is to convey the new market reality to sellers, as exaggerated price expectations often lead to longer sales times, higher marketing costs, and ultimately a less favourable sales result. Benjamin Lorenz, Managing Director of Homeday, explained that these conversations are not always easy. Many sellers still base their prices on the expectations of past years. An effective argument is often a change of perspective, such as comparing the monthly instalments for a EUR 400,000 loan in 2021 and today. With an interest rate change from one percent to four percent and a repayment of two percent, the monthly instalment would double from an initial EUR 1,000 to EUR 2,000. This comparison usually illustrates to sellers the change in realistically achievable prices. The current interest rate level around four percent was historically considered healthy and normal, but it significantly influences prices and the individual burden on buyers.
