- Research institute: a turnaround in the housing market
Is home buying becoming more expensive again? The Institute for World Economics in Kiel (IfW) has registered a turnaround in the German real estate market. Prices for condominiums, single-family and multi-family homes have risen between April and June compared to the previous quarter, the IfW announced.
"The trend reversal in the real estate market has begun," said IfW researcher Jonas Zdrzalek. Uncertainty among buyers is evidently decreasing, and the prospect of falling interest rates is stabilizing the market. The decline in new construction business is also reducing supply and leading to higher prices.
Compared to the first quarter of the year, prices for condominiums rose by 2.4 percent in the second quarter. Single-family homes cost 2 percent more, and prices for multi-family homes increased by 4.4 percent. In the previous quarter, prices had fallen. The data is based on the Immobilienpreisindex Greix, which contains data from 19 cities and the Rhein-Erft district near Cologne. Among other institutions, the IfW is involved in Greix. The index is based on transaction data from notary contracts.
Rising prices in Hamburg, falling prices in Cologne
Among Germany's seven most populous cities, prices for condominiums rose most sharply compared to the previous quarter in Hamburg (4.3 percent), Frankfurt (3.7 percent), and Düsseldorf (2.2 percent). In Stuttgart, prices rose by 0.6 percent, while in Cologne, they fell by 0.4 percent. No current data was available for Berlin and Munich. Outside the category of the seven most populous cities, prices for condominiums rose significantly in Münster - by 5.6 percent.
The IfW believes that a correction in the real estate market may be coming to an end after around two years. A correction is typically understood to be a downward movement in an index that corrects inflated values. Greix recorded a price decline of around 14 percent over around two years, the IfW announced.
Prolonged upward trend only interrupted?
Among the most populous cities, the correction was strongest in Stuttgart, where prices fell by more than 20 percent. The decline was smallest in Berlin, where apartment prices fell by more than 10 percent at their peak.
"The data from Greix suggests that the real estate sector is regaining momentum and that the market has decided on a direction after volatile months," said Zdrzalek. The decline was short and sharp. It would be surprising if it now rose at the same pace. According to Zdrzalek, the correction could have been an interruption in a long-term upward trend.
Increase in transactions
Greix also shows that more real estate was bought and sold between April and June than in the second quarter of the previous year. Transactions are about 10 percent higher than the value from the comparison period, said Zdrzalek. He did not provide a total number. Since transactions are subject to seasonal fluctuations, the IfW compares annual values. Business picks up towards the end of the year, according to the researcher.
Despite the increase, transaction activity remains at a relatively low level, the IfW said. Transactions are at around 60 percent of the average from 2019 to 2021. The value for new buildings is even lower, at around 35 percent. The researchers did not provide reasons for this development in a brief report.
The turnaround in the real estate market observed by the Institute for World Economics (IfW) is not only limited to Germany, as prices are rising in major cities like Hamburg and Frankfurt.
Germany's economic stability, along with the prospect of falling interest rates, is contributing to the recovery in the real estate market, as indicated by the IfW.
