Interest rates remain stable, purchasing power of property increases

Good news for buyers: after the turbulence of the past two years, the property market has stabilised and adapted to the changed conditions. In June 2024, the European Central Bank (ECB) even lowered the key interest rate for the first time by 0.25 percentage points to 4.25 per cent. What does this development mean for buying a property?

In principle, the first base rate cut at the beginning of June this year can be seen as a positive signal. Although property prices have fallen by an average of 8.4 per cent in 2023, they are still at a high level overall. If interest rates remain stable, purchasing power will also be strengthened and the property market revived.

Is now the right time to buy a property?

Anyone who has been planning to buy a property for some time should not put off their plans any longer. Experts expect property prices to rise again soon due to lower financing costs. Two aspects could become problematic for prospective buyers: The limited supply will not meet the rising demand and investors will become more active in the market in order to benefit from the low financing costs. Lower interest rates generally encourage investment and have a significant impact on the dynamics and price development of the property market. It is therefore to be expected that property prices, which have recently fallen sharply, will soon rise again.

What impact do stable interest rates have on purchasing power?

The lowering of the key interest rate by the ECB has a direct impact on the financial markets. Banks can borrow money from the central bank at more favourable conditions as they have to pay less interest. This leads to increased liquidity and makes financing more affordable for property buyers. Building interest rates are also falling. Overall, lower interest rates facilitate access to loans and property financing, which ultimately leads to more properties changing hands.

Purchase price level still high despite stable interest rates – how to finance successfully

Despite falling property prices, the overall purchase price level for property in Germany is still high. The right property financing is therefore crucial for a successful property purchase. Buyers should disclose their financing options to make it easier for sellers to adapt to the market. In addition, equity of 20 to 30 per cent of the purchase price is recommended in order to obtain financing from the banks. Government subsidies for energy-efficient properties offer grants and tax benefits.

A local quality estate agent can assist you at every step of the buying process, from finding the ideal property to developing a suitable financing strategy and signing the purchase contract.

Do you need help buying a property? Get in touch with us! We will be happy to advise you and can recommend independent financing experts.

Note

For reasons of better readability, the generic masculine is used in this text. Female and other gender identities are explicitly included where this is necessary for the statement.

Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific individual case.

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