Residential property prices in Germany are plummeting

Residential property prices in Germany are plummeting

Prices for residential property in Germany fell sharply last year, with an average decline of 8.4 percent compared to 2022. This marks a break in the trend as prices had been rising continuously since 2008. According to the Postbank Real Estate Atlas, prices for residential property have fallen significantly in the majority of regions, with condominiums being cheaper in around 96 percent of regions than in the previous year.

An important reason for the fall in prices is political intervention in the real estate market. Discussions about the Building Energy Act and the Building Directive have led to uncertainty on the market. The implementation of these laws and the associated renovation requirements have unsettled potential buyers and led to them postponing their purchasing decisions.

Experts such as Thomas Beyerle from Catella and Michael Voigtländer from IW Cologne emphasize the effects of political interventions on prices. The uncertainties in the market and higher renovation costs have led to a larger discount for older properties. Eckhard Wurzel from the University of Konstanz points out that not only rising interest rates, but also regulatory conditions influence the stabilization of real estate prices.

The forecasts for 2024 suggest that prices will fall even further before rising again, probably from 2025. The construction crisis in Germany, caused by inflation, a shortage of skilled workers and political over-regulation, has led to a shortage of supply. The increasing demand for housing, especially in metropolitan areas, is meeting a decreasing supply, which will influence prices in the long term.