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Real estate in Germany – Residential prices rise

Posted by Tanya Yujelevski on 17/09/2019

The German Office of Statistics publishes fresh data: prices of apartments and private homes are on the rise

Supply is insufficient, and interest rates have never been lower

The German National Bureau of Statistics released fresh data last week, confirming the fact that German housing prices continue to rise in the periphery, similarly to the major cities. On average, the increase in prices across Germany was 5% compared to the same period last year. In the “Big 7” the prices of apartments rose by 8.6%, and of private homes by 6.9%. These figures for peripheral areas were 1.7% and 4.5%, respectively. According to the data, prices have increased by an average of 22% since 2015, with prices in major cities rising by 41% for apartments and 36% for homes. In less central areas, figures stand at + 21.4% for homes and + 16% for apartments.

High demand from both private and institutional investors is pushing the prices up. Ernst & Young conducted a survey showing that many insurance companies purchase mostly office real estate, but also residential real estate, and 70% of companies that participated in the survey plan to continue this trend. Investments in shares, as compared to real estate, are considered to be a higher risk.

Experts from Europace say prices are rising because supply is simply unable to meet demand, but this is not the only parameter. In addition, an increase in income and favorable financing conditions contribute to the significant increase. In analyzing the data, it can be seen that in practice, it is only in Munich that buyers will have to spend more of their monthly income to finance their real estate: this is due to higher income levels and significantly lower interest rates than in the past.

In addition, the amount of building permits that the state grants does not satisfy the demand. This year, the number of permits distributed decreased compared with last year. This is in addition to the estimate that the gap between the amount of permits that corresponded to the level of demand compared to the actually distributed permits is about 100,000.

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