Almost exactly at the end of 2022, a development that no one had believed possible for twelve years began in Munich. Real estate prices in Munich began to fall, albeit slowly.

What almost no one suspected: since then they have continued to decrease significantly until today. It is currently not possible to predict when the end will be reached. The decline began with small steps, less than one percent, when the banks' official interest rates rose again and, with them, the lending rates for potential buyers.

“That was a very unusual super cycle,” the head of market research institute IVD Süd, Stephan Kippes, said of the previous twelve mega years when he presented the latest assessments on Monday morning.

The great years of the Munich real estate market are over

According to his assessment, a market correction is currently taking place. Building land prices are also falling. Compared to spring 2023, they fell by another ten percent (3,150 euros per square meter for apartment properties). Munich-based real estate agents were almost always able to choose the buyer in the twelve super years between 2010 and 2022. For a long time there was a gold rush atmosphere among real estate agents. It's not uncommon for a sale to end in an open bidding war.

Anyone who sat next to a Munich real estate agent's regular table in a café in Bogenhausen in 2016 or 2017 often heard competitive debates about who would soon go on which luxury vacation or which supercar someone would soon be able to afford.

That has changed drastically. Munich brokers have to work much harder to attract potential clients. Even Munich's rare single-family homes, which have only been on the market for a week, are falling in price. Its value has fallen by another 5.2 percent, which is still a very high level compared to Germany.

Munich: Even the value of new condos is falling

After exceeding the two million euro mark for a time, this price has corrected significantly to an average of €1.84 million (2.075 million in spring 2023). The situation is similar for semi-detached houses: between one million (existing ones, -2.8 percent) and 1.2 million euros (new ones, -3.6 percent).

Similar image with the semi-detached houses. They cost on average between 1.38 million (existing houses, -2.5 percent) and 1.65 million euros (new buildings, -5.2 percent). Finally, the question remains what is currently happening with the most traded property in Munich: the existing condominium.

Also in this case prices continue to fall. Even the value of the new condo is decreasing. Existing condominiums cost 7,600 euros per square meter (-5.9 percent). New building ready for first occupancy: 9,800 euros per square meter. For the first time in a long time, this value is below 10,000 euros on average. A quick 20-year comparison: In 2004, the existing condo in Munich cost 2,500 euros per square meter.

Real estate experts expect the development to be completed soon.

So times are a little better for buyers, but they may not last long. “I don't think we are in the second or third year of a six-year cycle,” says Stephan Kippes. That's the pace in normal markets. He believes in a timely turnaround in Munich: “Construction activity has decreased drastically, which is a major concern. And at the same time we still have a lot of immigration pressure in Munich,” says the expert.

A peculiarity of the city: statisticians currently count up to 20,000 new inhabitants in Munich each year. At the same time, central banks have not raised key interest rates recently. In the medium term, this will cause demand to recover again and prices to rise again, says Kippes. He simply does not dare to predict the exact time.

By Hüseyin Ince