LONDON, Nov 21 Reuters German house prices will fall 3.5 next year as the cost of living crisis and rising borrowing costs hits consumers, but the chances of an outright crash are low, according to a Reuters poll of property market experts.

Harmonised consumer price inflation in Europe39;s largest economy was 11.6 last month and the European Central Bank has been raising interest rates just as the bloc is likely heading into a recession, putting intense strain on household budgets.

Average house prices in Germany will fall 3.5 in 2023 the Nov. 818 poll of 12 market watchers predicted, a sharp turnaround from the 0.5 increase predicted in an August poll. In 2024 they will fall 0.5 but then rise 1.0 in 2025.

But when asked about the chances of a crash in the market over the coming year, 11 respondents said it was low and one said very low. Only one said it was high.

Weakening demand for housing loans and declining purchasing power of consumers indicate the turnaround in the residential real estate market has already begun however, we expect a significant price correction rather than a real crash in house prices, said Carsten Brzeski at ING.

Still, the median response when asked how much prices would fall from peak to trough was 10.0, with the steepest drop given as 17.5.

In the first quarter of 2022, we once again saw very high increases compared with the previous year compared with these values, 10 less is quite realistic, said Jörg Utecht at mortgage broker…