Property prices in Germany 'begin to stagnate'

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Property prices in Germany 'begin to stagnate'
Flats in Hamburg. Photo: picture alliance/dpa | Marcus Brandt

House prices in Germany are showing signs of stagnating after a recent drop, according to new research. But the situation varies across the country.


It's been a time of turbulence for Germany's property market lately. 

Due to rocketing inflation which has led to rising interest rates, demand has eased on housing and sparked noticeable declines in property prices after years of growth. 

But new figures show that this trend may not last. 

The Association of German Pfandbrief Banks (vdp), which represents large real estate lenders, found that flats and houses fell in price by just 0.9 percent in the second quarter of 2023 compared to the first quarter.

READ ALSO: Map - Where property prices are forecast to rise and fall in Germany 

When compared to the same quarter last year the average price of homes fell by 5.4 percent, said the association, which represents Deutsche Bank, Commerzbank and major savings banks. 

Yet it's clear something has changed. 

"The downward momentum of property prices has noticeably eased," said the vdp report.  

According to the findings, prices for owner-occupied residential property fell only slightly in the second quarter (minus 0.4 percent compared to the previous quarter), while the reductions for apartment buildings were larger.

"There are signs of stabilisation on the residential property market," vdp Managing Director Jens Tolckmitt told DPA.


One reason for the change, Tolckmitt said, is that construction interest rates have recently settled at a higher level. "There is growing confidence in the market that long-term lending rates will not rise much further."

The recent drop in property prices is mainly down to higher lending rates, which make financing a home more expensive for people. 

According to the Federal Statistical Office, houses and flats fell in price in the first quarter of 2023 by an average of 6.8 percent compared to the same quarter last year, and by 3.1 percent compared to the previous quarter. Official stats for the second quarter are still pending. 

House prices fall the least in Berlin

According to the vdp study, residential property prices in Germany's seven major cities fell by an average of 1.1 percent compared to the previous quarter this year, and by 5 percent year-on-year.

The smallest decline in prices was reported in the capital Berlin, with a drop of 3.6 percent within a year.

Demand has remained fairly steady in Berlin, with the costs of renting also shooting up there. 

Blocks of flats in Berlin

Blocks of flats in the German capital of Berlin. Photo: picture alliance/dpa | Florian Schuh

The highest property price drops were recorded in areas where costs have been high for some time, including Frankfurt (-9.1 percent), Munich (-6.7 percent) and Hamburg (-6.4 percent). In fact, it's only in Düsseldorf where prices rose - although the increase was small at 0.1 percent.


The vdp's index is based on data on property transactions from more than 700 banks and is said to be more meaningful than analyses based on ads. This is because property sales are negotiated and changes to asking prices are common.

READ ALSO: REVEALED: How the cost of renting in Germany compares to home ownership

Pressure on the rental market

Meanwhile, significant pressure on the rental market is continuing. 

Experts have said that due to fewer opportunities to buy homes in Germany because of the rising mortgage rates, people are staying in or reentering the rental market. 

Prices on new contracts rose fiercely in the second quarter of this year -  by 6.2 percent compared to the same quarter last year, according to the vdp report.

"The demand for (rental) housing remains high," said Tolckmitt. Unsurprisingly, Berlin topped the list of cities when it comes to rocketing rents, with an increase of 9.5 percent within a year.

"For years, too few flats have been built in Berlin in relation to the influx of new residents," Tolckmitt said. 

READ ALSO: Where rent prices are rising the fastest in Germany 


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