In 2023 more properties were foreclosed upon than in the previous year, according to specialist publisher Argetra.
After three years in which the number of distressed sales or bank foreclosures of German residential property had fallen, the current economic and - particularly - the financing environment has caused a reversal in the trend. In 2023 more properties were foreclosed upon than in the previous year, according to specialist publisher Argetra Verlag, which tracks the sector.
The Ratingen-based publisher, which tracks foreclosure data across all the nearly 500 district courts in Germany, says in its latest annual overview that court proceedings were opened for 12,332 houses, apartments and plots of land in 2023, slightly more than in the previous year at 12,077 properties. The value of foreclosed properties rose by 15% to €3.87 billion, although the number of court appointments rose only by 2.1%.
Argetra writes that "a toxic mix of a weak economy, high inflation and a weak property market" is having an impact. Unlike in previous years, when practically every property could find a buyer, demand for property is now significantly lower. The publisher said it was bracing itself for a significant increase in foreclosures over the coming years.
A good two-thirds of foreclosures in 2023 were residential properties, with the lion's share being detached and semi-detached houses, followed by condominiums. The average price at which a property was auctioned off in 2023 was €313,955 compared to €278,254 in 2022. However, typically only about half of the foreclosure proceedings actually end up in court, with the rest of the properties being sold by private treaty before coming to the actual forced auction.
The highest average market values were achieved in Berlin (€1.08 million), followed by Hamburg (€1.02 million). 53% of all appointments registered by Argetra arose from marriage dissolutions and communities of heirs (so-called partition auctions) - both categories that Argetra said were rising disproportionally.
As the most populous federal state, North Rhine-Westphalia has led the way in foreclosures for years with a share of around 20 %, says Argetra. According to the report, an average of 30 out of 100,000 households were affected by foreclosures in Germany in 2023. In Thuringia, the number of scheduled appointments was 52, more than twice as high as in its southerly Bavaria, for example.
Among cities, Berlin leads the forty cities with the most court appointments, followed by Munich, Leipzig, Chemnitz, Zwickau and Duisburg. In the Top 40 locations surveyed, representing around 18% of Germany's population, 30% of all property auctions took place, - significantly above the national average.
New additions to the blacklist of the "Top 40" foreclosure cities include Düsseldorf, Ingolstadt, Rastatt, Heilbronn, Heidelberg and Ludwigslust. However, falling out of the "Top 40 Blacklist" this year were the cities of Gelsenkirchen, Mühlhausen, Coburg, Siegburg, Luckenwalde and Pirmasens. Noteworthy for Argetra was that 14 of the 40 cities have fewer than 50,000 inhabitants.
Argetra noted that Germany's current economic weakness is not adequately reflected in the figures. The 2023 figures represent volumes and prices arrived at after long processing times and delayed price corrections - the 2024 figures are more likely to reflect the current recession, recent inflation and new (lower) price levels that had their roots in 2022.
Walter Ruesch, CEO, Argetra
As REFIRE reported in July last year, Walter Ruesch, the CEO at Argetra had earlier been warning of the build-up of a wave of defaults, 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, and later.
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 at the time. "Irrationally inflated real estate prices increasingly form an explosive cocktail with recklessly awarded financing."
In this latest report, Argetra suggests that the sharp falls in residential property prices and recent lowering of financing costs could offer property buyers a historic entry opportunity and the odd bargain for individual properties via the forced sale route. (Caution, as always, is advised in this very specialised field - it is ridden with traps for the unwary.)
