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German home prices “start to decline”

German home prices “start to decline”

According to a new study, house prices in Germany appear to be stagnant following a recent decline. However, the situation differs from state to state. The recent period for the German real estate market has been turbulent. After years of price increases, demand for housing has slowed down as a result of skyrocketing inflation, which has also caused mortgage rates to rise. But recent data indicate that this tendency might not continue. A large real estate lenders’ association, the Association of German Pfandbrief Banks (vdp), revealed that the price of apartments and houses dropped by just 0.9% in the second quarter of 2023 compared to the first quarter.

Last year German home prices

    • A group consisting of Deutsche Bank, Commerzbank, and major savings banks reported a 5.4% home price decrease compared to the same quarter last year.
    • The vdp report highlighted a noticeable easing in the downward momentum of property prices.
    • Apartment building prices showed a more significant 0.4% decrease than owner-occupied residential properties in Q2.
    • The change was attributed by market observers to increased construction interest rates, with expectations of a limited rise in long-term lending rates.
    • Rising loan rates are a key factor driving the ongoing decline in real estate values, leading to more expensive home financing.
    • The Federal Statistical Office recorded a 3.1% average price decrease for homes and apartments in Q1 2023 compared to the same period last year.
    • Official statistics for Q2 2023 are still pending.

House prices fall the least in Berlin

  • Residential property prices in Germany’s seven largest cities decreased by an average of 1.1% from the prior quarter of this year.
  • Year-to-year, these property prices saw a drop of 5% as per a vdp survey.
  • Among the cities, Berlin had the smallest price reduction, experiencing a 3.6% dip over 12 months.
  • Despite this, Berlin’s rental prices have risen while demand remains stable.
  • Cities such as Frankfurt (-9.1%), Munich (-6.7%), and Hamburg (-6.4%) witnessed significant declines in real estate prices.
  • Düsseldorf was the only city where prices increased, albeit by a marginal 0.1%.
  • The VIP’s index, utilizing real estate transaction data from over 700 banks, is regarded as more insightful than ad-based evaluations due to its incorporation of negotiation and price reduction information.

Pressure on the rental market

  • The rental market in Germany is under significant pressure due to individuals choosing rentals amid challenges in home purchasing caused by rising mortgage rates.
  • In the second quarter of this year, new contract prices surged by 6.2% compared to the same period last year, according to a vdp study.
  • Demand for rental housing remains strong, particularly evident in Berlin’s exceptional 9.5% rent increase over a single year.
  • The influx of new residents in Berlin has consistently underscored the inadequacy of the housing supply, further worsening the situation, as noted by Tolckmitt.

In conclusion, Germany’s rental market is strained as rising mortgage rates push individuals towards renting. The vdp study reveals a 6.2% spike in new rental contract prices, with high demand, notably evident in Berlin’s 9.5% annual rent increase. Insufficient housing supply further compounds the situation in the city.

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