Real estate prices are once again trending upwards – as confirmed by various indicators. According to the monthly data published by the provider Europace, German property prices have now risen uninterruptedly for eight months. The index indicates that prices rose by 2.3% between the end of 2023 and the end of August 2024. In addition, the volume of new construction loans recently reached a two-year high, while construction interest rates have fallen to a two-year low. This trend is being further supported by the European Central Bank’s interest rate cuts.
The chart above shows the year-on-year price trend on the German real estate market since 2010. Recently, the decline has been steadily decreasing and a transition into positive territory seems possible soon. The lower chart shows how property prices have been rising again since 2019 following a low point in 2022 (represented by the red line of the Europace House Price Index). The blue line, which shows the ECB’s key interest rate, is negatively correlated to this. This rose significantly from 2022 and led to considerable difficulties on the real estate market. However, we have seen two interest rate cuts since June 2024 and the outlook for further falling interest rates could provide an additional boost to property prices.
Compared to the second quarter of 2023, property prices declined in many regions of Germany. However, compared to the 1st quarter of 2024, prices for apartments only fell in sparsely populated rural areas. On average, prices for detached and semi-detached houses rose in all region types compared to the previous quarter, as the latest report from the Federal Statistical Office shows.
In Germany’s seven largest cities (Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart and Düsseldorf), property prices rose by 1.6% for apartments and by 2.3% for detached and semi-detached houses compared to the previous quarter. Compared to the same quarter of the previous year, however, apartments in these cities were 1.5% cheaper, while prices for houses fell by 4%.
According to government statistics, house prices in other independent cities rose by 1.4% compared to the previous quarter, while a fall of 0.1% was recorded compared to the same quarter of the previous year. Detached and semi-detached houses were 1.3% more expensive than in the 1st quarter of 2024, but 4.9% cheaper than in the 2nd quarter of 2023. In sparsely populated rural regions, buyers also had to pay 0.9% more for detached and semi-detached houses than in the 1st quarter of 2024, but remained 5% below the level of the 2nd quarter of 2023. Prices for apartments in these areas fell by 3% compared to the previous quarter and by 6.5% compared to the same quarter of the previous year.
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