German property prices continue to fall
Germany's real estate boom has ended - at least for the moment - as experts warn of continued decline after a drop in house prices at the end of last year.
German property prices fell about 1.8 percent compared to the third quarter of 2022, but were still up by 2.1 percent year-on-year.
A report from the Association of German Pfandbrief Banks (VDP) that came out on Friday noted real estate declines across the board, with office and retail space prices also going down.
However, two major German cities bucked the general trend.
In Frankfurt, the drop in value was steeper than in most other German cities. Property prices in Germany's banking capital are down 2.7 percent compared to a year ago and 4.8 percent when stacked up against 2022’s third quarter.
The housing market in Berlin, however, showed comparative resilience throughout the year. Property prices in the capital went down by only 0.7 percent in the fourth quarter and are still up by 4.6 percent compared to what they were a year ago.
READ ALSO: Ask an expert: Is now a good time to buy property in Germany?
VDP’s index is based on transactional data from 700 banks, rather than asking prices - meaning that they measure what properties actually ends up selling for. The index finds higher interest rates to be the main reason for the price fall, as fewer people can afford mortgages.
They’re expecting moderate declines to continue for the next few quarters, but probably not enough for prices to return to 2020 levels.
Even with the decline in house prices, renters are still feeling the pinch. Contract rents rose by an average of 1.9 percent in the fourth quarter of 2022 - something VDP CEO Jens Tolckmitt says is a result of slow housebuilding in Germany.
“There are no signs of a trend reversal here either, on the contrary, because new construction activity in Germany is still far behind demand,” he said.
READ ALSO: German government set to miss target for new homes this year
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German property prices fell about 1.8 percent compared to the third quarter of 2022, but were still up by 2.1 percent year-on-year.
A report from the Association of German Pfandbrief Banks (VDP) that came out on Friday noted real estate declines across the board, with office and retail space prices also going down.
However, two major German cities bucked the general trend.
In Frankfurt, the drop in value was steeper than in most other German cities. Property prices in Germany's banking capital are down 2.7 percent compared to a year ago and 4.8 percent when stacked up against 2022’s third quarter.
The housing market in Berlin, however, showed comparative resilience throughout the year. Property prices in the capital went down by only 0.7 percent in the fourth quarter and are still up by 4.6 percent compared to what they were a year ago.
READ ALSO: Ask an expert: Is now a good time to buy property in Germany?
VDP’s index is based on transactional data from 700 banks, rather than asking prices - meaning that they measure what properties actually ends up selling for. The index finds higher interest rates to be the main reason for the price fall, as fewer people can afford mortgages.
They’re expecting moderate declines to continue for the next few quarters, but probably not enough for prices to return to 2020 levels.
Even with the decline in house prices, renters are still feeling the pinch. Contract rents rose by an average of 1.9 percent in the fourth quarter of 2022 - something VDP CEO Jens Tolckmitt says is a result of slow housebuilding in Germany.
“There are no signs of a trend reversal here either, on the contrary, because new construction activity in Germany is still far behind demand,” he said.
READ ALSO: German government set to miss target for new homes this year
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