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PROPERTY

Why house prices in Munich are starting to fall

The real estate market in the southern German state of Bavaria is changing due to the precarious economic situation, a new report has found.

A view of homes in Munich.
A view of homes in Munich. The real estate market is changing. Photo: picture alliance / Matthias Balk/dpa | Matthias Balk

What’s happening?

Germany’s largest state – Bavaria – is known for many positive things, such as stunning nature, culture and festivals. But it also has a reputation for being an expensive place to live. Many cities, especially Munich, are notorious for having some of the highest rental and property costs in the country. 

But it looks like the trend of rising house prices is beginning to dampen. 

According to the latest report by the Real Estate Association Germany South Region (IVD Süd e.V.), inflation and increased mortgage interest rates have put an end to the period of significant hikes in the Bavarian real estate market – at least for the time being. 

“The rapidly growing financing costs and the uncertainties associated with the impending recession in Germany as a result of the Ukraine war are inhibiting the dynamics of market activity and, in particular, the price dynamics in the residential real estate market,” said Professor Stephan Kippes, head of the IVD market research institute.

It reflects a general trend that we’ve been starting to see in Germany as the tough economic situation bites. 

According to a recent study by property search portal ImmoScout24, the number of people buying houses in Germany fell dramatically in the second quarter of 2022. And In many of the major metropoles, property prices also went down as people struggled to find interested buyers.

READ ALSO: How property prices are dropping in major German cities 

Where can we see this trend?

The price changes can be seen clearly in the state capital Munich, reported regional broadcaster BR24.

According to the study, the average property price, which was €9,500 per square metre in spring, has now dropped to €9,450. 

In some Bavarian cities, the trend reversal is not yet as noticeable. In Nuremberg, for example, property prices are still rising but at a slower rate than previously seen. The price of a property in spring was on average €3,630 per square metre, and is now €3,710, according to the study. 

Experts say it shows how the situation is developing. 

“The state capital of Munich, where the first price declines for residential real estate were identified in the fall of 2022 for the first time in a long time, could serve as a seismograph for future developments in Bavaria’s large and medium-sized cities,” said Kippes. 

Homes in Erfurt, Thuringia.

Homes in Erfurt, Thuringia. Photo: picture alliance/dpa | Martin Schutt

Interest increases for buyers

At first glance, this development could seem tempting for those looking to buy property in Germany.

But Kippes points out that buyers are hardly benefitting from the decreasing prices – because interest rates have risen. 

“A few months ago, you could get an interest rate of 0.8 percent,” said Kippes. “If we take a purchase price of €500,000, let’s assume that €150,000 is equity and a €350,000 loan is needed; two percent repayment, 10 years fixed interest rate. Then, you would have paid €817, but today it would cost you €1,473.”

The IVD study said that the historically low-interest rate level of the past years in Germany “made it possible to compensate, at least partially, for the massive increases in purchase prices in many places”.

READ ALSO: The rules foreigners need to know when buying property in Germany 

“Now that the relief provided by low-interest rates has largely disappeared, but at the same time purchase prices have remained at dizzying heights, owner-occupiers in particular, who traditionally often finance with a high proportion of borrowed capital, are increasingly dropping out as buyers,” said the study. 

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RENTING

Tinder for flat seekers: How a new German app wants to revolutionise the rental market

Mietz, a new rental app, allows users to swipe right and left to be matched up with new rentals. The Local spoke to founder Lena Tuckermann about how she hopes to help international residents in Germany find their dream flats.

Tinder for flat seekers: How a new German app wants to revolutionise the rental market

After five months spent looking for a flat in Hamburg, involving 50 hours of online searching and sending 200 emails, Lena Tuckermann jokingly asked her friends: “Why isn’t there something like Tinder for flats?”

But what started as a joke quickly became a reality when she decided to build an app that functioned in a similar way to the dating app Tinder.

Along with co-founder Johann Kim, Tuckermann set up a rental app with a matching algorithm and in-app contract processing, designed to help apartment seekers and renters to find each other quickly, easily and securely. 

Mietz founders Lena Tuckermann and Johann Kim. Photo: Mietz

Apartment seekers can swipe right on rentals they like the look of and left on those not to their taste. On the other end, the renters can view the users’ profiles and, if there is a match, the two sides can start talking.

Mietz is free of charge for apartment hunters and students can use the app to find new roommates for free.

The app launched in October and already has over 6,000 users. Currently, the app has listings in Berlin and Frankfurt, but will soon be extending its roster with apartments in Braunschweig, Hamburg and Munich.

READ ALSO: EXPLAINED: The German cities where rents are rising fastest this year

‘Safety on both sides’

“Internationals are one of our main target audiences,” Tuckermann explained, as the company focuses on listing apartments with less bureaucratic requirements, which, for example, don’t require tenants to provide SCHUFA checks.

But at the same time, there is a strong emphasis on safety, and a desire to help flat hunters avoid being scammed.

“We work very closely with the companies offering the apartments, and try to create safety on both sides”, said Tuckermann.

“Most of our users are currently based in Germany, but we are working on expanding that with university partnerships around the world, to reach students looking for places to stay in Germany”.

Most of the apartments currently listed on the app are from businesses with larger apartment portfolios, but private renters can create profiles and upload listings, also for flat shares.

While the business landlords don’t swipe left and right on the faces of prospective renters, private renters and those offering rooms in a flatshare can do so.

“I think, when you’re looking for someone for a flat share, you do want to get an initial impression of a person, and pictures definitely help with that,” Tuckermann explained.

The Mietz App shows the swiping process. Photo: Mietz

Everything about the app is designed to take the pain of long, frustrating flat searching away. “You don’t have to send emails, and you only share your documents if you know the landlord is interested”, Tuckermann said.

Another part of this is the ability to sign digital contracts online, to make the sometimes lengthy rental process run more smoothly.

READ ALSO: The most expensive (and cheapest) cities in Germany to rent a room

“I spoke to one company with over 1,000 apartments, which had previously had to send their rental agreements by post – some of them to India. This meant that some people were waiting over six weeks before their contracts were finalised,” said Tuckermann.

It’s still very early days for Mietz, but the feedback so far from users has been very positive.

“We need a bit of time to get going and to be able to compete with the well-established rental portals. But the feedback we’ve had so far has been great, I think because it made the process of looking for an apartment less painful and because we try hard to match our users with suitable places to live,” said Tuckermann.  

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