Struggling Homeowners Face More Forced Auctions in Hesse: A Second Consecutive Year
Increased instances of compulsory auctions observed in Hesse region - Compulsory sale event in Hessen occurs once more
Let's get down to it: in Hesse, home and apartment sales through compulsory auctions have risen for the second year straight, all thanks to soaring interest rates and mortgage payments. As many as 2,084 owners were left with no choice but to sell via compulsory auction, marking a 6.9% increase from the previous year, according to Younes Frank Ehrhardt, CEO of the Hesse Real Estate Owners' Association (Haus und Grund Hessen).
Delve a bit deeper with statistics from the Hessian Ministry of Justice, and you'll find 1,949 new applications in 2023 - a 15.7% surge compared to 2022. Ehrhardt expressed concern about the persistent upward trend, lamenting that we seemed to be far from brighter days. The number of applications decreased by approximately 6.2%, 4.3%, and 7.4% in the years 2019 to 2022.
Keeping it real, Haus und Grund Hessen represents more than 69,000 members who collectively own 85.4% of the housing stock in the state.
Why, you ask, are forced auctions on the rise? Well, Ehrhardt points to fluctuating interest rates that have lingered at lofty levels following the sharp jump in 2022, and the ongoing struggle on the real estate market. The burden of high loan installments for new or additional financing is causing troubles for some owners. If they cannot find a buyer on the open market, the property goes straight to auction.
So, what are forced auctions all about? They're a way for creditors to recoup their investments, usually after real estate owners encounter financial calamity, fail to meet mortgage payments, or rack up debts. In such instances, the creditor initiates a compulsory auction procedure at the local court, setting a minimum price for the property based on an appraisal.
The Hessian Ministry of Justice isn't shedding any light on the reasoning behind the increase in forced auctions.
Ehrhardt's outlook for 2025 remains grim, with 474 new applications in the first quarter suggesting the trend won't reverse. The infamous Heating Law won't provide any relief, as potential buyers may shy away from older, unsanitary properties due to necessary modernization measures factored into the purchase price. Politics is hence urged to create some breathing room and establish stability.
The Building Energy Act (GEG), or Heating Law, generally calls for a 65% usage of renewable energies in newly installed heating systems starting from 2024. This can be accomplished through the use of a heat pump, but the requirements are subject to many minute regulations regarding the heating exchange.
While the CDU, CSU, and SPD coalition have vowed to scrap the Heating Law and replace it with a more flexible alternative, the specifics remain unclear. It seems likely that we'll still have a Building Energy Act in place.
Checking in on local courts paints a patchy picture. Auctions at the Wiesbaden Local Court, for example, have reportedly doubled in 2024, though lack of concrete figures prevents a definitive number. Auctions at this court usually fall short of market value.
The Kassel Local Court, on the other hand, saw an increase from 119 applications for compulsory auction in 2023 to 170 in 2024.
However, the Frankfurt and Gießen Local Courts didn't report any surge in cases. The Frankfurt Local Court declined to confirm any increase in proceedings, claiming 253 forced auctions in 2023, with a slight dip to 219 in 2024. Proceeds from these auctions aren't statistically recorded, but bids are primarily based on the 7/10 threshold of the respective market value, which might benefit interested parties but may leave creditors less than satisfied.
The number of forced auctions of properties at the Gießen Local Court dipped slightly in 2024 compared to the previous year, according to a spokesperson. Nevertheless, there was a significant increase from 2022 to 2023. Historically, the number of cases stood at 70, 85, 109, and 104 in the years 2021 to 2024, respectively.
- To mitigate the rise in forced auctions, some have suggested investing in vocational training for homeowners to improve their personal-finance management and real-estate business skills.
- In light of the increasing number of forced auctions, a community policy proposal has been put forward, aiming to provide financial assistance and vocational training to struggling homeowners.
- While the increased finances from forced auctions may initially seem appealing to creditors, long-term economic stability might be better ensured through vocational training and business initiatives that empower homeowners, reducing the need for such auctions.
