The German real estate market experienced the steepest price decline in 2023 for the past 60 years. But what does this mean for your wealth? This article shows you how to identify the five biggest drivers of devaluation and take proactive measures against them.
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The topic briefly and concisely
The depreciation is primarily driven by five factors: market dynamics, energy efficiency, building structure, location development, and legal requirements.
Properties with poor energy ratings (Class G/H) suffered price reductions of up to 28% in 2023 compared to energy-efficient properties.
Proactive, data-driven assessments are crucial for identifying risks early and strategically increasing property value.
Imagine the value of your property falling without you noticing immediately. In 2023, the prices for multi-family houses dropped by over 20 percent, a historic decline. Driven by interest rate changes and new legislation, this trend is causing uncertainty among many owners and heirs. It is no longer just about location, but a complex mix of market dynamics, the condition of the building, and above all, energy efficiency. However, this change also presents opportunities. With the right data and a clear strategy, you can not only stop the depreciation but also strategically increase the potential of your property. We show you what matters now.
Market Dynamics: Properly Interpreting Price Cycles
The real estate market undergoes cycles that significantly affect the value of your property. After years of booming, prices for single-family homes dropped by an average of 11.3 percent in 2023. This price decline was the steepest since records began in the 1960s. The main causes were the increased financing costs and high inflation, which dampened demand.
However, forecasts for 2025 suggest a stabilisation with slight price increases of 1 to 4 percent. This upturn is expected to be unevenly distributed, favouring energy-efficient properties in good locations. For property owners, it is crucial to understand these market fluctuations and not to panic. A data-driven analysis helps determine the optimal timing for investments or sales. The current phase also offers opportunities as the extreme overvaluations of previous years have been corrected. However, market recovery alone is not enough to secure the value of every property.
Energy Efficiency: The New Standard for Property Value
The energy condition has become the main factor influencing property value, rather than a secondary issue. An analysis by JLL in 2023 showed that multi-family homes with the lowest energy ratings, G and H, were up to 28 per cent cheaper than properties with the highest efficiency ratings. This price reduction, often referred to as the 'Brown Discount', has increased by nearly 7 per cent compared to the previous year.
Especially in rural areas, price reductions for an energy efficiency class C can already be 25 per cent. The reasons for this trend are diverse, ranging from legal requirements like the Building Energy Act (GEG) to the increased awareness among buyers of high energy costs. Investing in energy refurbishment is therefore no longer just a cost issue but a direct measure to increase value. The following actions are particularly effective:
Replacing the heating system with a heat pump or another efficient system.
Insulating the façade, roof, and basement ceiling to reduce heat losses by up to 30 per cent.
Installing multi-glazed windows with modern seals.
Installing a photovoltaic system to lower operating costs and increase self-sufficiency.
These value changes through refurbishment are measurable and make a property future-proof. The building structure itself plays an equally important role.
Building structure and maintenance: Uncover hidden risks
Every property is subject to a natural aging process, which, without countermeasures, leads to a loss of value. A significant backlog of maintenance that has built up over years can sensitively reduce the market value. According to ImmoWertV, construction defects and damage must be properly taken into account in the valuation, which often leads to deductions in practice.
Even in markets with high demand, buyers react sensitively to critical defects like moisture damage. The costs to remedy such damages can quickly reach five-figure amounts and often exceed the mere devaluation. A leaking basement seal, for example, can cause repair costs of over 20,000 euros. Early detection and remediation of defects and legacy issues are therefore economically sensible. A professional assessment reveals these risks before they become an expensive problem.
Location and Demographics: Assessing the Future of Your Region
The macro-location remains a crucial factor, but demographic changes are redrawing the map. While metropolitan areas such as Berlin or Munich continue to grow, some rural regions could lose up to 30 percent of their population by 2040. States like Saxony-Anhalt (-17.2%) or Thuringia (-14.9%) are particularly affected. This population decline inevitably leads to vacancy and a decrease in property prices in the affected regions.
In contrast, good connections to public transport can increase a property's value by up to 15 percent. To minimise risks when selling a house, owners need to analyse the specific development of their location. Important factors include:
The development of the local population size and age structure.
The availability of jobs and the economic development of the region.
The quality of infrastructure, including schools, shopping facilities, and medical care.
Planned infrastructure projects that can upgrade or downgrade a region.
A data-driven location analysis is essential to realistically assess the long-term value development of a property. This is particularly relevant in the context of changing legal requirements.
Legal Framework: Anticipating Regulatory Influences
Laws and regulations provide the framework within which property values develop. Changes, such as those to the Building Energy Act (GEG), have direct financial impacts on owners. Failing to meet new energy standards can not only lead to fines but also significantly restrict the marketability of a property. A property that does not meet legal requirements suffers a measurable loss in value.
The obligation for modernisation and maintenance under § 177 BauGB requires owners to rectify deficiencies. Ignoring such obligations not only risks consequences from outdated valuations but also official orders. Therefore, proactive planning and awareness of current legislative changes are crucial to protecting the value of one's property and developing proactive strategies.
Proactive Value Protection: From Analysis to Strategy
The depreciation of a property is not an inevitable fate, but a variable that you can control. The key lies in a proactive and data-driven approach. Instead of reacting to devaluation, owners and heirs should act. A neutral, AI-supported assessment provides a precise foundation for all strategic decisions and uncovers risks before they become costly.
A regular revaluation every 24 to 36 months can help identify market trends early and optimise your portfolio. With a clear data basis, renovation measures can be planned purposefully and investments justified. Do you know where your property really stands today? The free Auctoa ImmoGPT chat can provide you with an initial assessment in just 60 seconds. For an in-depth analysis, our strategies for risk minimisation are crucial. This is how you transform uncertainty into a clear course of action.
depreciation
The factors that influence the value of a property have become more complex. Market dynamics, energy efficiency, building substance, and demographics create a challenging environment for owners. Yet, within every risk lies an opportunity. Those who understand the drivers of depreciation and act based on data can not only preserve their real estate assets but also actively increase them. Ultimately, the value of your property is the result of your decisions.
Additional useful links
Bundesbank offers detailed statistics on real estate and construction prices.
Destatis provides comprehensive data on house prices and building land.
BBSR offers an interactive dashboard with current data and analyses of the real estate market report.
Destatis reports on current developments in the real estate sector in a press release.
Destatis highlights specific aspects of the real estate market in another press release.
Bundesbank provides an indicator system for analysing the residential real estate market.
ifo Institut publishes a press release on expected price developments in the global real estate market.
FAQ
What role does demographic change play in the value of my property?
A crucial factor. In regions with a declining population, demand decreases, leading to vacancies and falling prices. In growing cities and their surrounding areas, however, high demand supports property values.
Is an energy-efficient renovation always worth it?
In most cases, yes. The investment not only enhances living comfort and reduces operating costs but also significantly increases the market value and marketing prospects of the property, as buyers are willing to pay more for energy efficiency.
How often should I have my property valued?
In a volatile market like the current one, we recommend a reevaluation every 2 to 3 years. This allows you to respond to market changes in a timely manner and make informed decisions regarding investments or a potential sale.
What is the difference between a construction defect and building damage?
A construction defect is a fault that occurs during the building of the structure (e.g., a planning error). A building damage often occurs due to external influences or neglected maintenance (e.g., water damage from an old pipe). Both reduce the value.
How can an AI assessment like the one from Auctoa help me?
An AI-powered assessment analyses thousands of data points, from market trends to comparable sales and location forecasts. It provides you with an objective, neutral, and data-driven evaluation of the value and risks of your property in no time.
