German house and apartment prices drop further

World Friday 21/June/2024 19:58 PM
By: DW
German house and apartment prices drop further

Berlin: Germany's Federal Statistics Office released figures on Friday that showed domestic property prices slipping further in the first three months of 2024.

The country's property market has declined since mid-2022 — a phenomenon largely attributed to a steep rise in interest rates.

The figures showed property values down 1.1% from January to March compared with the end of 2023, the sixth consecutive quarter of decline in both cities and rural regions.

Prices fell by 5.7% year-on-year. The biggest declines compared to the same quarter last year were seen for single and two-family homes in Germany's seven largest cities (Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart and Düsseldorf), at -9.5%.

German houses are often split to accommodate more than one family.

Apartments in these cities fell in price by an average of 4.6% over 12 months.

In sparsely populated areas, buyers paid an average of 6.7% less for detached and semi-detached houses compared to a year ago, while there was a 2.4% fall in apartment prices.

However, the most recent fall in prices was less marked than in previous quarters, with the third quarter of 2023 showing the steepest drop.

Until the fourth quarter of 2022, house prices had shown a constant increase since 2010 — rising by 12.8% in July, August, and September 2021.

Plummeting prices have been largely attributed to reduced demand as the cost of borrowing increased, making buying less attractive for private buyers and large investors.

Eurozone monetary policymakers started to hike interest rates in July 2022 seeking to tamp down inflation in the wake of the COVID-19 pandemic and Russia's full-scale invasion of Ukraine.

The European Central Bank cut interest rates for the first time since 2019 in early June, as eurozone inflation gradually showed signs of easing.

Meanwhile, demand for housing remains high, particularly in cities, with a lull in new construction caused by the higher interest rates and increased construction costs.