Soaring Forced Auctions in Hesse: A Looming Crisis
Increased instances of compulsory auctions observed in Hesse - Forced auction in Hessen continued as a new round began
Hey there! Let's dive into the grim reality of skyrocketing forced auctions in the German state of Hesse.
Over 2,000 property owners have found themselves in a precarious situation, facing the prospect of forced sales — a 6.9% increase compared to the previous year. According to Younes Frank Ehrhardt, CEO of the Hesse Real Estate Owners' Association, this spike is a cause for concern, signaling a disturbing trend that indicates tough times ahead.
Data from the Hessian Ministry of Justice reveals a staggering 15.7% surge in new applications for forced auctions in 2023. It seems the good years are long gone, as the number of applications has been on a steady downward trajectory since 2019.
The Hesse Real Estate Owners’ Association represents the interests of more than 69,000 members who collectively own 85.4% of the state’s housing stock. So, what's going on? Why are we seeing such a steep rise in forced auctions?
Well, it seems that fluctuating interest rates continue to remain stubbornly high after their dramatic increase in 2022. This, coupled with the difficult climate on the real estate market, is causing quite a stir. High loan installments for new or follow-up financing are pushing some property owners to the brink. If they can't find a buyer on the open market, it's off to the forced auction they go.
Forced auctions are essentially a way for creditors to recover their losses. It all begins when property owners, due to financial difficulties, are unable to meet their mortgage payments or face mounting debts. The creditor kicks things off by initiating a forced auction procedure at the local court, setting a minimum price for the property based on an appraisal.
The Hessian Ministry of Justice doesn't seem to have a clear understanding of the reasons behind the surge in forced auctions. However, Ehrhardt isn’t pinning much hope on a downward trend, with 474 new applications in the first quarter of 2025 hinting at more of the same for the rest of the year.
But hey, there's a silver lining — sort of. The so-called Heating Law, or building energy law, that comes into force from 2024, requiring newly installed heating systems to operate with 65% renewable energy, is meant to help ease the situation. Unfortunately, potential buyers are expected to factor in upcoming modernization costs, which might deter them from buying older, unsanitary properties. This has prompted calls for politics to step in and provide relief and certainty.
While it's unclear what exactly will be the outcome of the ongoing political discussions about the Heating Law, one thing's for sure — we're heading for choppy waters. Stay tuned for more updates from the world of real estate in Hesse!
Discerning the Bigger Picture
- Economic Slump: Germany's economy is bracing itself for a slowdown, potentially exacerbating financial pressures on property owners.
- Rising Interest Rates: Watch out for soaring interest rates affecting borrowing costs and property affordability, making it more difficult for property owners to maintain mortgage payments.
- The Heating Law: Although not directly mentioned, laws like the Heating Law could impose additional costs on property owners for energy efficiency upgrades, further straining finances.
- Real Estate Taxes and Expropriation: The enforcement of land charges through public auctions is subject to Real Estate Transfer Tax (RETT), but the specific impact on Hesse and the influence of expropriation laws on the trend in forced auctions remains unclear.
- In light of the rising forced auctions in Hesse, it might be prudent for the community to implement a policy that offers vocational training programs focused on the real estate sector, to help property owners manage their finances more effectively.
- Meanwhile, to address the high interest rates that are contributing to the surge in forced auctions, the government could consider investing in sports infrastructure projects as a means to stimulate the economy, potentially reducing the financial burden on property owners.
