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Updated December 22nd, 2023 at 14:43 IST

German residential property prices face 10.2% decline

This downturn comes after years of robust growth in the property market across Europe, driven by low interest rates and high demand.

Business Desk
Germany
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Residential property prices in Germany registered a significant downturn, plummeting by 10.2 per cent in the third quarter compared to the same period a year ago, according to recent data. This decline marks the fourth consecutive quarter of decreasing property values and represents the most substantial contraction since record-keeping began in 2000, signalling a severe crisis in Germany's real estate sector.

Konstantin Kholodilin, an expert from the German Institute for Economic Research (DIW), highlighted that Germany experienced a speculative price bubble until 2022, which has now burst. 

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"Until 2022, there was a speculative price bubble in Germany, one of the biggest in the last 50 years," said Konstantin Kholodilin from the macroeconomics department of the German Institute for Economic Research (DIW).

"Prices have been falling ever since. The bubble has burst."

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This downturn comes after years of robust growth in the property market across Europe, driven by low interest rates and high demand. However, escalating rates and associated costs have halted this trend, leading to financial strain for developers as bank financing becomes scarce and property transactions stall.

The data further reveals specific vulnerabilities within the market, with single- and two-family home prices in major German cities witnessing a sharper decline of 12.7 per cent in the third quarter. Similarly, apartment prices recorded a 9.1 per cent decrease during the same period. Concurrently, the construction industry faces challenges, as indicated by a 6.3 per cent seasonally adjusted decline in orders for the sector in October.

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Echoing the concerns, the German Construction Industry Federation anticipates additional job reductions within the home construction segment. Adding to the complexities, Austrian property behemoth Signa, a prominent player in Germany's real estate landscape, recently declared insolvency, marking the most significant casualty thus far amid the ongoing property crisis in the region.

(With Reuters inputs)

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Published December 22nd, 2023 at 14:43 IST

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