Surging Property Auctions in Hesse: A Tough Year Ahead?
Forced auctions repeatedly occurring in Hesse - Forced auction in Hessen: Yet another sale by compulsion in the heart of Germany.
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Struggling finances and high living expenses have contributed to an uptick in properties being sold via forced auctions in Hesse for the second consecutive year. As Younes Frank Ehrhardt, CEO of real estate owner's association Haus und Grund Hessen, revealed, 2,084 homeowners faced this harsh reality, marking a 6.9% increase compared to the previous year.
The Hessian Ministry of Justice reported 1,949 new forced-sale applications in 2023, a 15.7% surge compared to 2022 - an escalation that has left Ehrhardt worried. "We had hoped for a turnaround and remain troubled by this trend," he stated. Over the past few years, applications have steadily declined by 6.2%, 4.3%, and 7.4%.
Haus und Grund Hessen champions the interests of over 69,000 members who own approximately 85.4% of the entire housing stock in the state.
What's causing this distressing surge in forced auctions?
Ehrhardt pinpointed volatile interest rates and the resulting high loan installments as the prime culprits. Increasing interest rates—a repercussion of their steep 2022 spike—have put a strain on many homeowners seeking new financing or refinancing options. For those unable to sell their properties on the open market, the forced auction route becomes their only viable option.
In essence, these forced auctions allow creditors to recover their debts. They typically ensue when a homeowner encounters financial hardship, defaults on mortgage payments, or accrues debts. Under these circumstances, the creditor initiates a forced auction proceeding at the local court, and the property's minimum sale price is determined by an appraisal.
The Hessian Ministry of Justice has yet to offer insights into the reasons behind the surge in forced auctions.
Ehrhardt's forecast for 2025 is grim: The first quarter already saw 474 new applications, hinting that this year's figures will not decrease. He criticizes the so-called Heating Law for not helping alleviate the situation, as it adds modernization costs to buyers' minds, potentially deterring them from purchasing older, substandard properties. Therefore, politics is urged to take action and provide incentives to restore relief and trust.
The Building Energy Act, colloquially known as the Heating Law, requires that starting from 2024, all newly installed heating systems must utilize 65% renewable energy. Although the regulations initially only apply to new developments, the reform faces criticism for generating numerous, complex stipulations for heating replacements.
The CDU, CSU, and SPD have pledged to abolish the Heating Law and replace it with a more streamlined, technology-agnostic version in their coalition agreement. However, the specifics of this replacement plan remain unclear. It's expected that the Building Energy Act will persist in some form.
A closer examination of local courts yields mixed results. For instance, the number of forced property auctions at the Wiesbaden Local Court has doubled in 2024, according to a court representative—although specific figures are unavailable due to organizational constraints. What's more, typical forced auctions fall below market value, which might benefit interested parties but fail to satisfy creditors fully.
The Local Court in Kassel has experienced a notable increase, with 119 applications for forced auction in 2023 and 170 in 2024.
In sharp contrast, the Local Courts in Frankfurt and Giessen have not reported an increase in forced auctions. Frankfurt had 253 proceedings in 2023 and 219 in 2024, with revenues not being statistically recorded. The spokesperson from Frankfurt cited that auction bids are predominantly based on a 7/10 threshold of the respective market value.
In Giessen, the number of forced auctions dropped slightly in 2024 compared to the previous year, according to a court spokesperson. However, there was a notable surge from 2022 to 2023. Given the relatively low baseline number, even small increases result in substantial percentage hikes.
To address the rising forced auctions in Hesse, it's crucial to investigate potential solutions that alleviate the financial burdens of homeowners.
In light of increasing loan installments due to volatile interest rates, providing accessible and affordable vocational training in personal-finance and real-estate investment could empower individuals to make informed decisions and navigate their financial predicaments more effectively.
