Construction costs are currently skyrocketing

What is happening in China right now will hit us with full force in 2-3 months. Some companies still have warehouses half filled. Raw materials and installation components are missing everywhere. A buddy works in civil engineering - pipes are available, but no seals. There is a company meeting next week and he firmly expects short-time work.

Buddy works at Mercedes in Ludwigsfelde. Probably hasn’t worked two weeks in a row for about 3 months. Almost all the time short-time work.

Why are "fixer-uppers" supposed to become cheaper now?

Because the target group of do-it-yourself renovators with moderate creditworthiness is now dropping out faster and faster. As Benutzer200 said, normally you only get a loan starting at 2% repayment. But if you can only afford 3-4% annuity and plan to do the renovation entirely by yourself... why should the bank still give you a loan? And for the group of those who "let others renovate," the price has to come down, especially because of rising costs. If instead of 100k I now have to invest 150k in the renovation (also due to new regulations), then the price has to go down accordingly.

Because the target group of self-renovators with moderate creditworthiness is now dropping out faster and faster. As Benutzer200 said, normally a loan is only available from 2% repayment. But if you can only afford 3-4% annuity and plan the renovation entirely on your own... why should the bank still give you a loan? And for the group of "renovation-doers", the price has to come down, especially because of rising costs. If I now have to invest 150k instead of 100k in the renovation (also due to new regulations), then the price must correspondingly come down

But from my point of view, that is not in line with reality. I’ll give a counterargument. Funding from kfw or energy consultants. What happened when they were introduced? Yes, prices also rose for kfw 55 houses. Energy consultants also raised their prices. Why should I now lower the price for a property that is scarce and where the land value will most likely continue to rise?? There will always be a buyer...

Why should I lower the price now for a property that is scarce and whose land value will most likely continue to rise?? There will always be a buyer...

Because it is no longer affordable? The prices for 40-50 year old existing properties were already outrageous before. In the rural areas where we searched, 400k was being asked for a run-down house of that age and was also paid. But a thorough renovation was still necessary then. New heating, bathrooms, facade, etc. And compared to autumn '20, it has worsened in that you can no longer simply replace an oil burner relatively cheaply with gas. That in Baden-Württemberg you now also have to install photovoltaics when renovating the roof. Material shortages and exploding material prices. Now interest rates have been added. If the bank does not value the house as highly as the buyer, the premium hurts twice as much when you are already at your limit. In most areas, the valuable part is not the land value but the house. In areas with a land value below 100€, a plot is then only worth 70k. Even if that still rises, if the house on it is a money pit, it simply does not make sense. And there's not always a buyer, at least not at ever higher prices. If the financing of the highest bidder fails due to lack of creditworthiness or valuation, the second one comes into play. If their financing fails as well... edit: maybe one should also consider here that there is not only buying or building. If prices rise so much that you make the bank your landlord... then you might as well remain a tenant. You know that the law is on your side, you don’t have to worry about maintenance and remain flexible. At prices of 40-50 years of cold rent and >2.5% interest, buying is purely a bet on value appreciation. The saved rent then no longer even covers the interest.

Because it is no longer affordable? The prices for 40-50 year old existing properties were already beyond reason before. In the rural areas where we searched, 400k was asked and also paid for a run-down house of that age. But there was still real renovation needed. New heating system, bathrooms, facade, etc. And compared to autumn '20, it has worsened that you can no longer simply replace an oil burner relatively cheaply with gas. That here in BW you also have to install photovoltaic systems when renovating the roof. Material shortages and soaring material prices. Now the interest rate is added. If the bank values the house lower than the buyer, the surcharge hurts twice when you are already at the limit. The land value is not the valuable part in most areas but the house. In areas with a reference land value under €100, a plot is then only worth about 70k. Even if that still rises, if the house on it is a money pit, it just doesn’t make sense.

And there is not always a buyer, at least not at even higher prices. If the top bidder’s financing fails due to lack of creditworthiness or valuation, the second bidder comes into play. If their financing also fails...

I am still skeptical. If people cannot afford the wreck, they will also hardly be able to buy a proper house.

I just don't see any rental yield anymore. And this should actually determine what a house is worth. At 0.5% interest, the high prices were still somehow justified. If the FED now gets serious and wants to fight inflation and interest rates rise to 4%, there are 2 possibilities. 1. Rents will become more expensive, and significantly so 2. Houses/apartments will become cheaper The USA currently have the same problem. mortgage rate 30y fixed (is standard there) is at 5.5% interest.