Study: Crisis continues: real estate prices continue to fall

According to the most important real estate financiers, the decline in house and apartment prices is continuing.

Study: Crisis continues: real estate prices continue to fall

According to the most important real estate financiers, the decline in house and apartment prices is continuing. According to data from the Association of German Pfandbrief Banks (VDP), residential properties fell in price on average by 1.7 percent in the third quarter compared to the second quarter. Compared to the same period last year, there was a decrease of 6.3 percent, reported the association, which represents, among others, Deutsche Bank, Commerzbank, Landesbanken and large savings banks.

The published figures show that the stabilization of the real estate market is taking longer than many expected. With the renewed decline, residential property prices in Germany fell for the fifth quarter in a row, according to VDP data. There were also significant price reductions again for commercial real estate. The downward trend from the first half of the year has continued, said VDP managing director Jens Tolckmitt. “A market revival is a long time coming.”

The property price index is based on data on transactions from more than 700 banks and is more meaningful than analyzes based solely on advertisements. Because when selling real estate, negotiations take place and deviations from the offer price are common.

The main reason for the drop in prices is sharply increased interest rates, which make loans more expensive. The demand for construction financing remains low. In the second quarter, according to the Federal Statistical Office, residential real estate prices fell surprisingly sharply by almost ten percent compared to the same period last year - the largest decline since 2000. Official data for the third quarter is still pending.

Price pressure also in metropolises

In the seven largest cities, where living space is particularly scarce, residential property prices fell by 1.3 percent compared to the previous quarter and 5.7 percent compared to the same period last year, slightly less than the national average. Within a year there was the largest price decline in Frankfurt (9.1 percent) and the smallest in Berlin (4.7 percent). Düsseldorf, Hamburg, Cologne, Munich and Stuttgart were in the corridor between minus 5.1 and minus 6.8 percent.

Meanwhile, the strong upward pressure on the rental market, which many people are turning to, continued. New contract rents rose by 5.8 percent year-on-year in the third quarter. “The increasing housing shortage and the associated excess demand are reflected in further rising rental prices,” said Tolckmitt.

According to VDP calculations, the price declines in commercial real estate were once again particularly large. At 10.6 percent compared to the same quarter last year, office properties fell more expensively than retail properties (-9.3 percent) for the first time since 2009. The trend towards home offices and stricter energy requirements are putting a strain on the office markets. Retail properties are also suffering from the trend towards online trading and consumer restraint due to inflation.

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