German Market Report: Developments in the German Residential Property Market 🔔
According to the latest monthly report from the Bundesbank, there have been significant developments in the German residential property market in 2022.
🏘️ Price Development of Residential Properties:
After a prolonged period of increase, prices for residential properties in Germany experienced a decline for the first time in the second half of 2022. This is attributed to the increased financing costs and high inflation which constrained the financial leeway for many prospective buyers and dampened demand. Despite the decline in the second half, the prices increased on an annual average in 2022 by 9%, according to the Association of German Pfandbrief Banks, with the increase mainly occurring in the first half of the year.
📈 Increase in New Contract Rents:
In contrast to property prices, rents in Germany in 2022 recorded a continuous increase. According to the Association of German Pfandbrief Banks, rents increased by 4.9%, the highest rate of increase since the start of the property market boom in the early 2010s. The increase was even more pronounced in cities.
🔨 Impact on New Construction:
The expansion of the housing supply significantly slowed down in 2022. The shortage of raw materials and building materials, coupled with a shortage of labor, led to a substantial increase in construction costs. This made new buildings financially less attractive compared to existing properties and led to more cancellations of construction projects. The number of completed apartments decreased compared to 2021.
🔍 Bundesbank’s Assessment:
Despite the decline in property prices in the second half, the Bundesbank estimates that residential properties in German cities are still overvalued by 25 to 40%.
For interested parties and investors in the property market, it is important to keep an eye on these trends and make informed decisions, especially in light of the current economic uncertainties.