German real estate market sees dynamic start to 2018

  • vdp property price index up by 8.8% in the first quarter of 2018 compared with corresponding period in 2017

  • Jens Tolckmitt: “But the pick-up in new construction activity seems to be easing the situation in the market for condominiums somewhat for the first time.”

The German real estate market again got off to a dynamic start to the year. The vdp property price index, which is calculated on the basis of real transaction data, rose by 8.8% compared with the corresponding quarter one year earlier. This is the steepest growth rate since the observation period for the index began in 2003.

Residential property prices advanced by 9.2% compared with the first quarter of 2017. This price increase is being driven, in particular, by the segment for multi-family houses (+10.9%). Prices for owner-occupied housing went up by 7.4%. “But the pick-up in new construction activity seems to be easing the situation in the market for condominiums somewhat for the first time,” remarked Jens Tolckmitt, Chief Executive Officer of the Association of German Pfandbrief Banks (vdp). In the top 7 cities of Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, and Stuttgart, property buyers had to invest more (+13.7%) than in the first quarter of 2017 – and therefore, as expected, more than in the German housing market as a whole. The increase for commercial properties came to 7.4%. Once again, office properties recorded an especially strong price hike (+9.7%).

This price growth is due to the continued stable economic situation and the persistence of the low-interest-rate environment. Moreover, user markets remain intact, which is to say that demand for housing is high and, at the same time, the supply of commercial premises is low. This leads to further rent increases. Compared with purchase prices, however, rents are rising considerably more slowly and not at the same rate in all segments.

“There is still no indication of the expected weakening of price growth,” Tolckmitt commented. “Looking ahead, however, we continue to believe that the rise in prices in the German housing market – both across the country and in the metropolitan areas – will decelerate.”

For details on the development of the individual market segments, and for all index data on the individual vdp property price indices (2003-2017) including charts and tables, please refer to the attached publication.

vdp Property Price Indices Q1.2018

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