The Matthew effect – who has, will be given – is a sociological thesis that can currently be studied in the real estate market. Real estate prices continued to climb to lofty heights last year, and real estate owners are benefiting from this. After a significant increase in the first Corona year 2020, the increase in real estate prices in the fourth quarter compared to the previous year was again more than twelve percent .
This emerges from data published by the Federal Statistical Office on Monday. According to the Wiesenbaden authority, this is the second year in a row with the strongest increase ever recorded since the beginning of the data series in 2000. If prices had increased by almost eight percent in 2020, it was another eleven percent in 2021.
Rural areas are catching up when it comes to price levels
In the meantime, the price explosion on the real estate market is no longer limited to metropolitan regions that are in high demand. At 15.9 percent, the prices for single and two-family houses have risen, particularly in sparsely populated rural districts, where condominiums have risen by a good 13 percent. More specifically, Interhyp broke it down.
The agent for real estate financing has calculated that buying a house now costs almost half a million euros on average . “We’re talking about an average price of 494,000 euros,” said Mirjam Mohr of the ” Schwäbische Zeitung “, she is the board member for private customer business at Interhyp.
And she expects prices to rise again this year.
Reasons for further rising prices are high demand with low supply, especially in metropolitan areas where people work. Indeed, this reinforces a certain social division that is evident in real estate ownership.
That means there are more and more cases in which the construction of a house or the purchase of a property can no longer be done by private households alone, if it is even affordable. In an increasing number of cases, family or friends have to contribute equity so that financing can even get off the ground.
Delivery bottlenecks and material price increases
Real estate and building prices are still being driven by the shortage of many building materials. Delivery bottlenecks as a result of the corona pandemic have been exacerbated again by the war in Ukraine.
On top of that, however, are the high energy prices. Ilona Klein, spokeswoman for the Central Association of the German Construction Industry: “We are seeing dramatic price increases and delivery problems for steel and bitumen and, as a transport-intensive industry, are of course struggling with the high diesel prices”.
It is a situation that means that many projects are unlikely to be completed.
Andreas Ibel , BFW President
It is true that the construction companies note slight increases in sales in their balance sheets for the past year. However, they are mainly due to the high prices, in real terms there was a decline in sales. The situation is more difficult than it has been for 20 years, according to the BFW, the Federal Association of Independent Real Estate and Housing Companies.
“It’s a situation that means many projects are unlikely to be completed; or cannot be started due to the very strong price increases in construction,” says BFW President Andreas Ibel of the “Schwäbische Zeitung”. The BFW represents around 1,600 mostly medium-sized companies such as builders and project developers.
As a response to this crisis situation, the federal government issued what is known as a “material price escalation clause” a few days ago: Prices for public construction projects that have skyrocketed compared to the original cost plan are to be gradually adjusted.
Building interest doubled since the beginning of the year
However, this does not help willing home builders or families who want to afford the dream of owning their own four walls. Not only do you have to factor in higher costs for materials when building or buying; they also have to cope with higher financing costs.
According to Interhyp’s calculations, building interest rates for ten-year loans have doubled from one percent to almost two percent in the first two months of the year. With the planned tightening of monetary policy by the European Central Bank, interest rates are likely to continue to rise in the future.
As a result, more and more people and families are feeling the Matthew effect – whoever has, will receive. As property owners benefit from the development, an increasingly harsh wind is blowing against those who are not in this comfortable position.
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.