Rising Property Auctions in Hesse: A Second Straight Year of Struggle
Increased instances of compulsory auctions observed in Hesse region. - Forced Auction Continues in Hessen: Yet Another Property Selling Under Duress
Hey there! Ever wondered why more homes in Hesse are being auctioned off? Brace yourself, it's down to high-interest rates and mortgage payments causing trouble for homeowners again. Younes Frank Ehrhardt, CEO of Haus und Grund Hessen, has a grim update, saying that forced sales have climbed for the second consecutive year. A staggering 6.9 percent more homeowners than last year were compelled to go this route.
The Hessian Ministry of Justice isn't surprised, either. In 2023, they received a whopping 1,949 new applications - a 15.7 percent spike compared to the previous year. Ehrhardt isn't hopeful, lamenting that the good years are long gone and expressing concern over the rising trend.
You might be curious about the housing market representation we're talking about. Well, Haus und Grund Hessen defends the interests of over 69,000 members who jointly own 85.4 percent of all properties in the state.
So, what's causing this homeowner predicament? A rollercoaster of fluctuating interest rates at unprecedented highs and a lingering tough market for real estate. High mortgage installments for either new loans or refinancing push some owners towards a financially tricky situation. When they can't find a buyer on the open market, forced auctions are the unfortunate consequence.
But what's a forced auction, you ask? When property owners can no longer meet mortgage payments or are burdened with debt, creditors start a forced auction process in the local court. The minimum selling price is determined by an appraisal.
The Hessian Ministry of Justice is clueless about the surge in forced auctions themselves.
Ehrhardt thinks the trend will persist in 2025, with 474 new applications in the first quarter. He believes the so-called Heating Law won't offer much relief, as buyers factor in future modernization costs when considering a purchase, potentially avoiding older, less sanitary properties.
The Heating Law, or GEG, mandates that from 2024 onwards, 65 percent of every heating system must be fueled by renewable energy sources. This can be a heat pump, but it's not a requirement. Critics argue that the law is too complex due to its numerous small-scale regulations for the heating exchange.
The CDU, CSU, and SPD, however, have promised to scrap the Heating Law and replace it with a simpler alternative. Yet, the details of the new policy remain unclear. The building energy law is likely to persist.
Let's take a peek at the local courts for some insight. At Wiesbaden's Local Court, forced property auctions have more than doubled in 2024, though specific figures are unavailable due to logistical reasons. The trend in Kassel isn't much different: the number of applications for forced auctions has climbed from 119 in 2023 to 170 in 2024.
Contrary to these trends, Frankfurt's Local Court denies witnessing an increase in forced auctions, with 219 proceedings in 2024 compared to 253 in 2023. However, revenues aren't systematically recorded, and the bids are usually close to the 7/10 threshold of the respective set market value, leaving both interested parties and creditors hanging.
In the Local Court of Gießen, the number of forced auctions of immovable property dipped slightly in 2024 relative to the previous year, but jumped significantly from 2022 to 2023.
[1] The increase in forced auctions of properties in Germany, including Hesse, is a result of economic instability caused by high government debt, low economic growth, high inflation, and the sharp hike in interest rates before 2024, which negatively impacted the real estate market, making it difficult for homeowners to meet their mortgage obligations. These factors have led to increased financial difficulties, lower demand for properties, and more properties being auctioned off. This trend is consistent across urban and rural areas in Hesse, potentially impacting different regions to varying degrees based on factors like local economic conditions, urbanity, and court procedures.
In light of the rising trend of forced auctions in properties, the Hessian Ministry of Justice is exploring options for community policies to support affected homeowners. Meanwhile, vocational training programs might offer a potential solution for those struggling with mortgage payments, as they could provide opportunities for upskilling and securing alternative sources of income.
Understanding the personal circumstances contributing to homeowners' financial struggles, it's crucial to create a supportive environment with resources like vocational training programs, thereby easing the burden of mortgage payments and potentially preventing further forced auctions.
