Analysts say that the German housing market faces a serious price correction in the next few years.
Interhyp data shows that the 10-year fixed rate has gone up from 1% to 3.9% since the beginning of the year, which usually causes demand to cool as fewer people can afford to take out loans.
Jochen Moebert, a macroeconomic analyst at the German lender, predicts that house prices will fall between 20% and 25% in total from their peak to trough in the coming months.
If you think about mortgage rates of 4% or 3.5% then you need higher rental yields for investors and it is clear that prices have to fall. According to The Cologne Institute for Economic Research, Germany has the second-lowest share of homeowners of all the countries in the Organisation for Economic Co-operation and Development.
Jochen said he wouldn't be surprised if it was over the next six months.
There is some positive momentum here if you look from an investor's perspective.
The chief economist at Berenberg expects a house price decline of at least 5% if not a bit more.
He said that the housing market is not doing as well as it could.
Many analysts are predicting a decline in Germany's housing market.
If there was no energy crisis, we expected prices to go up even more. Michael Voigtlnder from The Cologne Institute for Economic Research told CNBC that there is a very dramatic adjustment of conditions.
Two German cities are in the top four of the Global Real Estate Bubble Index for the year 2022, according to a recent report.
A bubble is defined as a separation of housing prices from local incomes and rents and the local economy.
The definition doesn't fit the German property market as a whole.
Veraguth said that the situation in Germany will be a correction rather than a bubble burst.
He said that a bubble burst would be more than 15% decrease in prices and that would be a very bad scenario.
A poll of property market experts predicted German house prices would fall.
Germany's property market is set for a correction, but not everyone agrees.
In an interview with CNBC's Joumanna Bercetche last month, the vice president of the Bundesbank said that there was a slowdown in the price growth for residential real estate.
House prices are rising but at a slower rate. There are no signs of a major slump in real estate prices or over valuations.
The housing market isvulnerable and the Bundesbank will keep a close eye on it.
The idea of a severe slump in the market has been rejected by analysts. The company's most recent forecast was published in July.
S&P Global Ratings will likely have to revise up their price forecasts for Germany this year.
He said that they had very strong demand.
It will take time for a change in financial conditions to trickle down and affect the housing demand.
More than 80% of mortgages in Germany are financed with fixed rates, so many households have locked in very favorable financing conditions.
Property prices were up by 6.1% in the most recent quarter compared to the previous one, according to data from the Association of German Pfandbrief Banks.
The organization expects the peak in Germany property prices to be for the time being, but the market is still functioning well.
Even if house prices dropped, it wouldn't be a bad thing because of the scarcity of housing, increasing rental prices and a strong labor market.
We would be on the price level of 2020 if house prices were reduced by 20%. This may be a problem. Maybe not.
He said that the price level was reached after 10 years of price increases.
The labor market will affect the property market.
If the labor market is able to weather the technical recession we will have at the end of the year, that will bode well for the housing market.
Schmieding said the long-term outlook for the German property market will be good if the country has a good labor market.
With Germany likely to slip into a mild recession in the coming months, the employment figure could be impacted.
The German economy grew slightly more than expected in the third quarter, raising hopes of a mild recession.
The German economy grew in the second quarter and year-on-year.
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