The number of forced sales of residential properties in Germany is again on the rise.
After a three-year hiatus the number of forced sales of residential properties in Germany is again on the rise, according to the latest data from Ratingen-based specialist Argetra Verlag, which tracks data from 500 local courts throughout the country.
In the first six months of this year, 6,379 properties with a total market value of €1.96 billion were foreclosed upon. A year ago, that was 6,248 units, with a volume of €1.66 billion for the same period.
While that's not a large increase, Argetra sees a definite trend change, and expects that number to rise throughout the second half of the year. The weak economy, declining purchasing power and high inflation with rising rents and energy prices are expected to lead to more personal insolvencies, resulting in more foreclosures. The effects of all this are likely to start really showing up in the figures only in 2024, say the authors of the latest study.
Another factor the authors point to is the degree of uncertainty surrounding future liabilities to ready the properties for compliance with the new energy-efficiency regulations of the Building Energy Act (GEG). Owners may effectively consider it too much trouble to invest further in weaker properties, and cease to upkeep mortgage payments, leading to bank foreclosure.
As always when REFIRE reports on the forced auction results, it's useful to compare different regions in Germany with previous patterns, although there is a degree of stability in this. Again, Germany's most populous state, North Rhine-Westphalia, accounts for about 20% of the total market. Among the big cities, Berlin heads the list, followed by Munich, Leipzig, Zwickau, Chemnitz and Duisburg.
Of the 40 "blacklisted" locations surveyed, which represent around 18% of the population, 30% of all real estate auctions took place and had thus significantly more distressed sales than the national average.
On a per-100,000 basis, Thuringia (with 27) had more than twice as many foreclosures as Bavaria (12). The average across the whole country was 15 per 100,000 households, the same as last year. The city with the highest market value of assets foreclosed was Hamburg, at an average value of €1.4 million. That figure in Berlin is about €1 million, putting it in second place. At the bottom of the ranking of market values is Saxony-Anhalt, at an average value of €80,000. With the national average now at €307,236, up from €265,730 last year, with market prices having barely risen in that time, it's likely that more owners in the middle classes are being forced to relinquish ownership.
Argetra also notes that 'partition' auctions are also rising strongly. These are where properties come to the market as a result of divorce, or where joint inheritors need or want to dissolve their joint ownership. These sales totalled €1.03 billion in the first half, representing 39% of the market, up from last year's 36%. In asset type, they made up 59% of land parcel sales, and 41% of sales of detached and semi-detached homes.
For all of 2022, a total of 12,077 properties were foreclosed upon, down from 13,163 in 2021 (at a market value of €2.9bn), according to Argetra. This was partly due to the number of consumer insolvencies falling by 17.3% to 63,500, mainly due to Corona-related deferrals, and owners selling off troubled assets before banks started foreclosure proceedings. However, the market value of the auctioned properties rose substantially, by 14.9% to €3.36bn.
Walter Ruesch
Walter Ruesch, CEO, Argetra
As we reported in August last year, Walter Ruesch, CEO at Argetra, was warning that a wave of defaults IS building up, suggesting that, with the usual processing time of up to a couple of years, the number of foreclosures is likely to become manifest in 2023 and 2024.
Many middle-income earners who may have bought in the last few years, may now be pushing their financial resources to the absolute limit, he suggested. The rise in interest rates, high inflation and wobbling consumer confidence could force many homeowners to the wall, believes Ruesch, with little room for renegotiation with financing banks.
"The fact that around 40% of these financings are structured variably means that financing costs are likely to explode as interest rates rise," said Ruesch. "Irrationally inflated real estate prices increasingly form an explosive cocktail with recklessly awarded financing."
Normally only about 50% of foreclosed properties end up in the courts, with the other 50% finding buyers before the court has to act.
