As of: February 9, 2024, 4:36 p.m
By: Lisa Mayerhofer
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According to a new study by the Kiel Institute for the World Economy (IfW), prices for German residential real estate will have fallen more sharply in 2023 than in at least 60 years.
(Archive image) © Julian Stratenschulte/dpa
According to a study, prices for apartments and houses fell more sharply last year than they have in at least 60 years.
There are big regional differences.
Berlin – Higher interest rates, inflation and the economic crisis are putting further pressure on the real estate market in Germany: According to a new study by the Kiel Institute for the World Economy (IfW), prices for German residential real estate will have fallen more sharply in 2023 than they have in at least 60 years.
The fall in real estate prices in Germany is “historically unique”
Condominiums fell in price by 8.9 percent, single-family homes by 11.3 percent and apartment buildings by 20.1 percent, as the IfW announced on Thursday.
Adjusted for inflation – i.e. measured in current purchasing power – the reduction in value is even more significant: it is around five percentage points higher.
“The speed and extent of the current decline in real estate prices in Germany is historically unique,” it said.
“Never since the appraisal committees began collecting purchase prices in the 1960s have real estate prices fallen so sharply so quickly.”
However, the most recent price decline was preceded by a historically unique price rally that began around 2009.
Since then, prices have risen three to four times, depending on the segment, before the sudden decline began in 2022.
Real estate groups expect further valuation losses
The fall in prices is also affecting the large real estate groups in Germany, because it is causing billions in devaluations of the stocks on their balance sheets.
“We expect further valuation losses,” Martin Thiel, CFO and co-head of the TAG Immobilien group, told the Reuters news agency.
Companies would have to prepare for a decline of up to 30 percent compared to the all-time highs in summer 2022.
Industry leader Vonovia assumes that the market may have reached its lowest point.
The IfW speaks of a price correction.
“In view of the exorbitant price increases for over ten years and a new interest rate environment, a phase of price correction is certainly appropriate and, even to the extent that it has been so far, is not worrisome for the overall economy,” said IfW President Moritz Schularick.
In the fourth quarter of 2023, the rate of price decline has slowed.
Compared to the previous quarter, prices for condominiums only fell slightly by 0.6 percent and those for single-family homes fell by 1.2 percent.
Multi-family houses even rose in price by 4.7 percent, but the fluctuations here are relatively high due to the low number of transactions.
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According to the information, the sales prices for condominiums in Germany's top 7 metropolises (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, Stuttgart) show a very heterogeneous development.
In Cologne and Stuttgart, prices fell quite significantly by 3.6 percent each quarter compared to the previous quarter.
In Berlin (-0.4 percent), Frankfurt (-0.2 percent) and Hamburg (+0.2 percent) they moved more sideways.
Munich is the most expensive with a price per square meter of 8,600 euros.
“It is possible that real estate prices are beginning to bottom out,” said Schularick.
However, this will only become apparent in the coming quarters.
At least the behavior of the central banks suggests that interest rate cuts can be expected in the foreseeable future.
“This means that real estate financing should also become cheaper again and thus stimulate demand,” said Schularick.
Even outside the largest cities, there were large regional differences in the price development of condominiums at the end of 2023.
It became cheaper in Chemnitz (-3.5 percent), Wiesbaden (-3.9 percent) and Karlsruhe (-3.9 percent), but more expensive in Potsdam (+4.3 percent), Dortmund (+1.9 percent). ), Leipzig (+1.8 percent), Duisburg (+1.8 percent) and Lübeck (+1.5 percent).
“In the other cities, prices are rising slightly or moving sideways,” it said.
The study is based on the German Real Estate Index (Greix), a joint project of the expert committees for property values, ECONtribute and the IfW.
The purchase price collections of the appraisal committees, which contain notarized sales prices, are evaluated.
(lma/Reuters)