German property prices sink for the first time in 12 years

According to estimations by the Association of German Bond Banks (VDP), the cost of buying a house in Germany has sunk for the first time since 2010. Meanwhile, rents continue to rise.

Property prices sink in cities across Germany

In the third quarter of 2022, prices for flats and houses in Germany fell by 0,7 percent compared to the previous quarter. According to a recently published property price index compiled by the Association of German Bond Banks, a combination of rising interest rates on property-related loans and high inflation has slowed the housing market.

The index outcome is based on transaction data from more than 700 banks. Speaking to German broadcaster ZDF, managing director of the VDP Jens Tolckmitt said that the data indicated that the twelve-year upward trend in the property market was coming to an end.

Berlin property prices stagnate while Munich and Cologne sink

Identical to the market decrease trend over all, residential property prices in the seven largest German cities fell by 0,7 percent. In Berlin, one of the many German cities in a housing crisis, prices stagnated from the previous quarter. While in Cologne and Munich, the index recorded a drop of 0,6 and 1,5 percent respectively. 

Despite the drop in buying prices, the price of German rental contracts is on the rise. According to the VDP index, rents have risen by 4,8 percent in 2022. Increasing amounts of unaffordable housing across German cities and slow reactions by the previous and current German government to tackle the country’s housing crisis means there is great competition for what rental properties are left at affordable prices. 

While property purchasing prices have sunk slightly, they remain high across Germany. Speaking to ZDF, Tolckmitt pointed out that high purchasing prices add to further competition for rented housing in another way, by freezing out potential lower-income buyers. “[There] is a group of people who are actually interested in buying, but for whom the dream of owning a house will remain unfulfilled for the time being because of inflation and interest rate rises.”