2023-11-10 15:51:31
House prices in Germany continue to fall – in all property classes. The Association of German Pfandbrief Banks (VDP) reported this on Friday when presenting its figures for the third quarter. The Kiel Institute for the World Economy (IfW) also identified a similar trend on Thursday.
On average, residential property prices fell by 1.7 percent in the third quarter compared to the previous quarter and by 7.1 percent compared to the same quarter last year. “The price correction is still taking place in all asset classes – a market revival is a long time coming,” said VDP Managing Director Jens Tolckmitt.
Declining office prices
The fall in prices is hitting commercial real estate even harder than residential real estate. Office prices in particular fell significantly. The association emphasizes: For the first time since 2009, the price decline for offices was even greater than for retail properties, which have long been hit by the trend towards online shopping.
In the case of office properties, in addition to the increased interest rates and the weak economy in Germany, the trend towards home offices could also play a certain role, at least for B locations – just as the energy situation of a building currently has an important impact on the price.
Compared to the previous quarter, prices for commercial real estate fell by an average of 2.2 percent and by 10.3 percent compared to the same quarter last year, the association reports. Prices for retail properties fell by 9.3 percent over the year and by 1.2 percent over the month. Prices for office properties fell by 2.5 percent compared to the previous month and even by 10.6 percent compared to the same month last year.
“The uncertainty in the entire commercial real estate market remains high,” commented Tolckmitt. Residential properties fell by 1.7 percent compared to the previous quarter and by 6.3 percent compared to the same quarter of the previous year.
Taking into account the developments in the third quarter of 2023, the association’s managing director explained that the real estate market in Germany remains tense and that further price declines are likely: “The commercial real estate market continues to be characterized by external and internal uncertainties, which represent a burden on capital values,” led Tolckmitt out.
In contrast, he assessed the prospects for the residential real estate market more positively: “The residential real estate market is about to enter calmer waters.” There are differences depending on the region and city. The decline in residential property prices in the seven largest cities in the third quarter of 2023 was somewhat less severe than the development throughout Germany, reports the VDP. Compared to the previous quarter, prices in major cities fell by an average of 1.3 percent.
Frankfurt was particularly affected
Real estate prices in Frankfurt fell particularly sharply compared to the same quarter last year, falling by 9.1 percent. At minus 4.7 percent, Berlin had the smallest price decline among the large cities over the year. The declines in Düsseldorf, Hamburg, Cologne, Munich and Stuttgart ranged between minus 5.1 and minus 6.8 percent.
The figures currently published on the latest developments in real estate prices differ significantly depending on the institute and association. However, the VDP figures enjoy a relatively good reputation in the industry because they are based on actual transactions and not just on apartment advertisements on the Internet. The Federal Statistical Office does not want to publish its official house price index for the third quarter until December 22nd.
The crisis in the real estate industry is being exacerbated by tighter financing conditions, negative economic forecasts and increasing ESG pressure, writes the management consultancy and auditing company Pricewaterhouse Coopers (PWC) together with the Urban Land Institute (ULI) in a study also published on Friday. To do this, executives from the real estate industry were asked about their mood and their concerns.
Volker Looman Published/Updated: , Recommendations: 38 Christian Siedenbiedel Published/Updated: Recommendations: 51 Jan Hauser Published/Updated: Recommendations: 5 Christian Siedenbiedel Published/Updated: Recommendations: 9
A large majority of real estate managers surveyed said that higher interest rates would remain an important challenge for the real estate markets next year, as would the weak prospects for economic growth in Europe as a whole. Three quarters of those surveyed said that the current valuations on the real estate market do not yet reflect all the challenges and opportunities.
Many said they were afraid of “walking into an open knife” as the market in Europe remains characterized by great uncertainty. This is one reason for the significantly reduced investment volume.
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