Real estate value plunges dramatically in this locale.
Great news for purchasers! Post the height of the property market boom, property prices in Germany have been dwindling. In certain metropolises, this decline is quite substantial.
House and apartment prices in Germany have continued to decrease at the start of the current year, according to provisional data from the Federal Statistical Office. On average, residential real estate was 5.7% cheaper in the first quarter as compared to the previous year, and residential real estate prices decreased by 1.1% from the end of 2023 to March 2024. Prices decreased both in urban areas and rural regions.
The largest decreases compared to the previous year were observed for single-family and two-family homes in the metropolises Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart, and Düsseldorf, with a decrease of 9.5% for single-family and two-family homes and 4.6% for owner-occupied apartments. In sparsely populated rural regions, buyers paid on average 6.7% less for single-family and two-family homes and 2.4% less for owner-occupied apartments than in the first quarter of 2023.
Since mid-2022, the property market has been on a downward spiral, mainly due to significantly increased interest rates, which have increased the cost of credit. Many people can no longer afford to buy their own homes, and investments no longer make sense for big investors.
City demand stays high
However, there is still a high demand for housing in cities, while new construction is currently in the dumps due to increased interest rates and escalating construction costs. In April, the number of building permits for new and renovated residential buildings was significantly lower compared to the previous year. According to the latest data from the Wiesbaden statisticians, there were 14,300 units approved in that month, which is 17% fewer than a year ago.
Building permits including renovations also totaled 17,600, which is 17% below the value of the previous month. Representatives of the construction and real estate industry are demanding more government funding in the face of the housing shortage in urban areas.
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In cities like Frankfurt am Main, Cologne, Stuttgart, and Berlin, the demand for housing remains high despite the decrease in real estate prices. The Federal Statistical Office reported a 9.5% decrease in single-family and two-family homes in these metropolitan areas during the first quarter of 2024. On the other hand, Düsseldorf and Munich saw a reduction of 9.5% and 4.6% respectively in single-family and two-family homes. Despite the lower number of building permits due to increased interest rates and construction costs, the construction and real estate industry is advocating for more government funding to alleviate the housing shortage in urban areas.
