Real estate prices are skyrocketing: It is particularly expensive in these regions

Created: 03/28/2022, 14:50

By: Lisa Mayerhofer

Rising real estate prices have hit big cities and now rural areas too.

(Iconic image) © Soeren Stache/dpa-Zentralbild/dpa

Not only in big cities, apartments and houses are unaffordable for many people.

Rural areas are also affected by rising real estate prices.

An overview.

Wiesbaden/Frankfurt - It doesn't matter whether it's in the city or in the country: home ownership in Germany is tending to become more and more expensive.

In 2021, buyers had to put eleven percent more than a year earlier on average for apartments and houses, as calculated by the Federal Statistical Office*.

In the fourth quarter, residential real estate prices rose by 12.2 percent, the fastest since 2000.

Real estate prices benefit from high demand

Demand is high, supply scarce.

Coupled with low building interest rates, this has been driving prices on the real estate market for a long time.

This trend has accelerated in the past year.

From 2019 to 2020, apartments and houses had become 7.8 percent more expensive on average.

Word has gotten around that home ownership in cities like Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart or Düsseldorf is hardly affordable anymore*.

Now, the development towards more home office during the pandemic has also boosted the demand for living space in rural areas.

“The new records on the real estate market are supported by fears of interest rate hikes and rising inflation.

Many Germans are fleeing to concrete gold and are increasingly including the cities in the second row, after metropolises like Munich are already considered overvalued,” Eva Grunwald, head of Postbank's real estate business, recently analyzed.

"The corona pandemic has only strengthened the desire to have one's own home and expanded the radius."

Accordingly, the prices for single and two-family houses in sparsely populated rural districts rose particularly sharply in the final quarter of 2021, as the Federal Office announced: plus 15.9 percent compared to the same quarter in the previous year.

Condominium prices in these regions rose by 13.2 percent.

In more densely populated rural areas, prices for single and two-family houses rose by 14.5 percent, and condominiums rose by 11.2 percent.

Real estate prices: These regions are particularly expensive

According to Postbank calculations, Germany's most expensive patch remains Munich.

Nowhere else did buyers pay as much for a square meter of living space last year as in the Bavarian state capital: an average of 9,732 euros for an existing apartment.

In Frankfurt, therefore, 6586 euros per square meter were due, in Hamburg 6489 euros and in Berlin 5528 euros.

According to Postbank figures, the most expensive district in Germany with square meter prices of 7977 euros in 2021 was the district of Nordfriesland, which includes the North Sea islands of Sylt, Föhr and Amrum and holiday resorts on the coast such as St. Peter-Ording.

Otherwise, the list of the ten most expensive districts only includes districts from the commuter belt around Munich and from the holiday areas in the foothills of the Alps.

Bundesbank: Residential real estate overvaluations increased

The Bundesbank has been warning of overvaluations on the real estate market for years.

The price increases in Germany and other European countries recently also alarmed the EU Risk Council ESRB.

"The overvaluations in residential real estate increased," the Bundesbank stated in its monthly report for February.

"According to the latest estimates, real estate prices in cities in 2021 were between 15 percent and 40 percent above the price indicated by socio-demographic and economic fundamentals." In 2020, the range was still 15 to 30 percent.

In December, the German Institute for Economic Research concluded, based on an analysis of data from 114 major cities, that "speculative exaggerations are becoming more and more frequent, especially with condominiums and building plots in metropolises such as Berlin, Hamburg and Munich".

"There, but also in other large cities, price corrections on a larger scale are possible in the next few years."

The federal government also wants to ensure more affordable housing.

"We have set ourselves the goal of setting the course so that 400,000 apartments can be built each year, 100,000 of which are affordable, publicly funded social housing," affirmed Building Minister Klara Geywitz in the Bundestag last week.

Real estate prices: Little hope for relaxation

But there are doubts as to whether these plans can be implemented: many craftsmen and construction companies are working at full capacity due to the high demand for real estate.

In addition, building materials such as wood, steel and insulating materials have become extremely expensive in the past few months because demand on the world markets increased as part of the economic recovery after the Corona crisis year 2020 and delivery capacities are limited.

This also drives up construction and purchase prices.

Experts give builders and real estate buyers little hope of relaxation in the short term.

The Central Association of the German Construction Industry (ZDB) expects construction prices in Germany to rise again this year.

In 2021 they had increased by six percent.

"That was the strongest increase in over 20 years," said ZDB general manager Felix Pakleppa.

For 2022, the association expects four percent growth.

"That means it's calming down a bit, but prices are still rising." A level like before the pandemic is not foreseeable - "and that's mainly due to the sharp rise in material prices," said Pakleppa in February.