German residential property prices see largest drop 'in 60 years'

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German residential property prices see largest drop 'in 60 years'
Newly built apartments in Cologne, one of the cities which saw the largest property price drops in 2023. Photo: picture alliance/dpa | Rolf Vennenbernd

According to a new study, prices for German residential real estate fell more sharply in 2023 than they have in at least 60 years.


The price of condominiums fell by 8.9 percent, single-family homes by 11.3 percent and apartment buildings by 20.1 percent, according to the Kiel Institute for the World Economy (IfW) on Thursday. 

"The speed and extent of the current fall in real estate prices in Germany are historically unprecedented," the report stated. "Never before since the expert committees began collecting purchase prices in the 1960s have property prices fallen so quickly."

However, the recent dip in prices was preceded by a price rally, or a sustained period of increase, which was also unparalleled in historical terms and began around 2009. Since then, prices have risen three to fourfold, depending on the real estate segment, before an abrupt market crash began in 2022.

"In light of the exorbitant rise in prices for over ten years and a new interest rate environment, a phase of price correction is entirely appropriate and is not a cause for concern for the economy as a whole, even at the current level," said IfW President Moritz Schularick.

The study is based on the German Real Estate Index (Greix), a joint project of two expert committees for property prices - based on their notorised sales values - belonging to ECONtribute and the IfW.

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According to the data, the rate of price decline slowed in the fourth quarter of 2023. Compared to the previous quarter, prices for condominiums fell only slightly by 0.6 percent, while prices for single-family homes dipped by 1.2 percent. Prices for multi-family houses even rose by 4.7 percent, but the fluctuations were relatively high due to the low number of purchases.

Will prices continue to fall?

The sales prices for condominiums in Germany's top seven metropolitan areas (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, Stuttgart) differed drastically in 2023.

In Cologne and Stuttgart, prices fell quite significantly by 3.6 percent each in a quarterly comparison. In Berlin (down 0.4 percent), Frankfurt (down 0.2 percent) and Hamburg (up 0.2 percent), prices tended to stay more or less the same.

"It is possible that real estate prices are just beginning to bottom out," said Schularick, pointing out that a lot remains to be seen in 2024.


At least the behavior of the central banks, which are expected to cut interest rates in the foreseeable future, alludes to this, he said.

"This should also make property financing cheaper again and thus stimulate demand," said Schularick.

READ ALSO: Where are the cheapest and most expensive places to live in Germany?



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