Forced Property Auctions on the Rise in Hesse: A Breakdown
Increased mandatory auctions in Hesse region. - Compulsory Auction Enforced in Hessen Again
Hey there! It's no secret that the rise in high interest rates and loan payments have driven up the number of homes and apartments forced into auction in Hesse for two years running. As Younes Frank Ehrhardt, managing director of Haus und Grund Hessen, puts it, there were 2,084 owners who had no choice but to sell their properties through forced auctions – that's a whopping 6.9% increase compared to the previous year.
In 2023, the Hessian Ministry of Justice received 1,949 new application requests for forced auctions, a 15.7% increase over the previous year. And Ehrhardt expresses his concerns about this grim trend. Despite a decrease in applications in the years 2019 to 2022, the numbers are heading in the wrong direction again.
Haus und Grund Hessen represents over 69,000 real estate owners and manages 85.4% of the total housing stock in the state. They include owners who are having difficulty making loan payments due to high interest rates and a challenging real estate market. Ehrhardt explains that owners are facing difficulties when they can't find buyers on the open market, leaving them with no choice but to resort to a forced auction.
So, what exactly is a forced auction? It's a procedure initiated by creditors to recover their money when real estate owners can't repay their mortgages or have amassed debts. In Hesse, the creditor usually begins the forced auction at the local court and sets a minimum price for the property based on an appraisal.
The Hessian Ministry of Justice claims to have no insights into the reasons for the increase in forced auctions.
The prognosis for 2025 is not looking good, according to Ehrhardt. Data suggests that the number of new applications for forced auctions will not decrease this year. And recent political decisions aren't doing much to help either.
For instance, the so-called Heating Law, which requires newly installed heating systems to run on 65% renewable energy from 2024 onwards, will only make things more challenging for potential home buyers. The regulations don't help owners of older, unsanitary properties and add to their struggle to find buyers.
Politics is being urged to take action and provide relief to homeowners – and soon, as well. Germany's leading political parties – the CDU, CSU, and SPD – have announced plans to abolish the Heating Law and replace it with a more flexible and simplified law. However, the specifics of the new law have yet to be finalized.
When we take a closer look at local courts, we see a mixed picture. The number of forced auctions at the Wiesbaden Local Court has doubled, but at the local courts in Frankfurt and Gießen, no significant increase has been observed. At the Kassel Local Court, the number of forced auction applications has risen from 119 in 2023 to 170 in 2024.
It's important to note that forced auctions typically fall below market value, which can leave creditors and debtors facing unfulfilled expectations. In the Local Court in Frankfurt, for example, revenues from forced auctions are not systematically recorded.
Overall, it seems that fluctuating interest rates and a challenging real estate market are major contributors to the increase in forced auctions in Hesse. A stagnant economy, weak market conditions, and increased costs associated with legal and financial factors like retroactive transfer taxes may further complicate matters. However, without specific data and reports on forced auctions in major cities like Frankfurt and Wiesbaden, it's difficult to draw firm conclusions. Stay tuned!
- The rising number of forced auctions in Hesse could be a concern for personal finance and real-estate industry stakeholders, as it indicates a persisting challenge in the local housing market.
- While the Hessian Ministry of Justice lacks insights into the reasons for the increase in forced auctions, the local real estate market's challenging conditions and high interest rates are suspected to play a significant role.
- Vocational training opportunities might be valuable for those experiencing financial difficulties as a result of forced auctions, offering a pathway towards improvement in personal-finance management and even business ventures.
- Given the political discussions surrounding the Heating Law and its negative impact on homeowners, investing in vocational training programs focused on energy-efficient home improvement could potentially benefit the community by offering practical solutions to home buyers and sellers alike.
