Property market: institutes attest to exceptional situation

The leading economic institutes in Germany are largely in agreement: the current situation on the property market is exceptional. The figures on the development of property prices speak for themselves. But despite the crisis, there are the first rays of hope.

The bulwiengesa Property Index 2024 describes the development of property prices in Germany for the 48th time in a row. Increases in property prices were reported for 18 years. Now, stagnation, price declines and crisis-ridden project developer markets are being reported for the first time. The residential sub-index rose by just 1.0 per cent. Even during the Lehman crisis of 2007-2009, growth was between 1.1 per cent and 1.5 per cent. From 2020, growth was at least 5.0 per cent per year. However, the data for 2023 shows the first rays of hope.

According to calculations by the German Economic Institute (IW), property prices are likely to have bottomed out: prices for residential property have fallen for six consecutive quarters and are now rising again. In the fourth quarter of 2023, condominiums were already 0.8 per cent and houses 0.6 per cent more expensive than in the previous quarter. The bottom line is that prices fell by a good eight per cent compared to the first quarter of 2022. Prices fell particularly sharply in Munich (-13.2 per cent), Stuttgart (-13 per cent) and Hamburg (-12 per cent), with energy-efficient homes losing less value. The situation is different for rents. The trend here continues to point upwards: In the fourth quarter of 2023, rents were 5.3 per cent higher than a year earlier.

The latest update of the German Real Estate Index (GREIX) with data for the 4th quarter of 2023 shows that the price decline has not continued across the board. However, the speed and extent of the current fall in property prices in Germany are historically unprecedented. Never before since the appraisal committees began collecting purchase prices in the 1960s have property prices fallen so quickly and so sharply. Compared to the previous year, sales prices in 2023 fell by 8.9 per cent for condominiums, 11.3 per cent for single-family homes and 20.1 per cent for apartment buildings. Adjusted for inflation, the drop in value is even more pronounced at around five percentage points. The Greix is a joint project of the expert committees for property values, ECONtribute and IfW Kiel.

(Photo: © Heiko, Pixabay)