The Federal Statistical Office has recorded the sharpest decline in real estate prices in more than 20 years. The main reasons are the sharp rise in interest rates and the high construction costs.
The prices for houses and apartments fell more sharply last year than at any time since the turn of the millennium. Residential properties in Germany fell on average by 8.4 percent compared to the previous year, the Federal Statistical Office announced today. “This was the largest year-on-year decline since the time series began in 2000 and the first decline since 2007.”
The decline continued at the end of the year: in the fourth quarter of 2023, according to statisticians, prices fell by 7.1 percent compared to the same period last year and by 2.0 percent compared to the previous quarter. In a year-on-year comparison, existing properties fell by 7.8 percent – and thus significantly more than new buildings (minus 3.2 percent). As the Federal Statistical Office reports, prices fell for the fifth quarter in a row compared to the same quarter last year.
Falling prices in rural and urban areas
Prices collapsed both in the cities and in the countryside. According to the information, in urban districts the price decline for single and two-family houses was particularly large in the fourth quarter, at eleven percent compared to the same quarter of the previous year. In the seven metropolises – Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf – the prices for single and two-family houses fell by an average of 9.1 percent within a year at the end of the year, and condominiums cost 5.8 percent less.
The real estate market has been going downwards since mid-2022, the peak of the year-long boom. According to estimates by the Kiel Institute for the World Economy (IfW), there was the sharpest price decline in residential real estate in Germany in around 60 years in 2023.
The main reason is the sharp rise in interest rates, which has made loans much more expensive. Many people can no longer afford their own four walls and investments are no longer worthwhile for large investors. At the same time, demand for living space remains high, especially in cities, while new construction is in crisis due to rising interest rates and expensive materials.