A weakening macroeconomic backdrop has not halted the rise in German home prices, although Fitch Ratings believes that the rate of increase will slow over 2022 to 7-9% annual growth, down from 13-14% in 2021.

The firm stated: ‘This is consistent with our predictions at the start of the year, since when rising mortgage rates amid increasing inflation expectations have compounded affordability constraints, but inflationary pressures are also weighing on supply.

‘Prices rose by 4% during the first four months of this year. The outperformance of the Europace national price index compared to bulwiengesa’s index of home price growth in cities indicates that market activity has been supported by the shift in buyers’ preference from city-centre locations to suburban or even rural locations. This is a trend initially accelerated by the pandemic and now reinforced by affordability considerations.’

Fitch added that affordability pressures are an increasing constraint in Germany with purchase-related costs including purchase taxes, notary and broker fees, combined with a typical deposit of 15% for an average property, means first-time buyers need to find around €90,000.