Photo: Krisztian Bocsi/Bloomberg
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- Multi-family homes led the decline – by 20%
- Apartments fell in price by 9%, and individual houses by 11%
Prices for residential real estate in Germany showed a record drop in 2023 over the last 60 years, due to increased financial costs and the political situation that repelled potential home buyers.
While prices for apartments and private houses fell by 9 % and 11% respectively, the value of multi-family houses fell by 20% compared to last year, according to the German real estate index published by the Kiel Institute for World Economics.
The decline in prices for investment properties suggests that large buyers in the past year have become less risk-averse and are willing to purchase homes only at significant discounts.
For first-time homebuyers, financial difficulties associated with rising mortgages rates, the expiration of government subsidies was added. Tighter energy efficiency regulations and rising material prices have further cooled demand for existing housing, making it difficult to estimate the costs of future renovations.
Last year’s price declines followed an equally unprecedented rise in property prices following the 2009 financial crisis. Growth then accelerated in during the Covid-19 pandemic, and prices reached their peak in early 2022.
However, fourth-quarter figures indicate that the decline may soon stop. Moreover, in the last quarter of 2023, prices for multi-family houses increased by 5%, which suggests a return of investor interest in German residential real estate.
Published: 02/09/2024