Dramatic price drop: German real estate bubble has burst - financial expert analyzes sharpest decline since 2000.

Dramatic price drop: German real estate bubble has burst - financial expert analyzes sharpest decline since 2000.

According to a report by www.n-tv.de, real estate prices in Germany fell by an average of 10.2 percent in the third quarter of 2023 compared to the same period last year. This is the largest decline since the series began in 2000. The reasons for this are high inflation and increased financing costs, which have led to lower demand. In the top 7 metropolises in particular, there was a 12.7 percent decline in prices for single- and two-family homes. 9.1 percent less also had to be paid for condominiums.

Despite the expected change in interest rates, the downward trend in prices will continue in 2024, according to a study by DZ Bank. This is primarily because demand for housing remains high, while new construction has entered into crisis due to increased interest rates and expensive materials. Only around 245,000 apartments are expected to be completed in 2023, compared to over 295,000 last year. This is due, among other things, to the fact that there were 22 percent fewer residential construction orders than in the previous year.

However, the crisis in housing construction is slowing the price decline as living space remains scarce. DZ Bank even estimates that the number of apartments completed annually could fall to 200,000 apartments by 2025. The uncertainty surrounding funding for new construction due to the budget crisis is making the situation even worse.

Overall, it is to be expected that real estate prices in Germany will remain under pressure, especially in urban areas, while at the same time construction activity will continue to be affected due to the various challenges. This could have long-term effects on the real estate market and the financial industry.