According to new figures from the Federal Statistical Office (Destatis), property prices in Germany have seen the biggest drop in over 20 years, but the cost of buying a house remains unaffordable for many.
Property prices in Germany have fallen by an average of 10,2 percent in the third quarter of 2023 compared to the same period in 2022, that is according to figures from Destatis. The drop marks the biggest seen in the federal republic since records began in 2000.
While all types of housing have been affected by the drop, the cost of buying a house fell more than flat prices. In rural areas with a low population, the cost of buying a detached or semi-detached house fell by 12,4 percent compared to the previous year. The cost of buying a flat fell by 5,6 percent.
The drop in cost is a consequence of fewer people in Germany being able to buy their own house. Despite the record decline, stagnated wages, inflation and a housing market which is grossly unaffordable for many people means that banks are struggling to sell high-interest mortgages.
Germany’s largest cities, Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf, were all among the locations where housing prices dropped last year. On average the price of a detached or semi-detached house in these cities fell by 12,7 percent in the third quarter.
But this price drop will still leave buying a house unaffordable for most city dwellers. According to an internal assessment published by property portal Immowelt in January 2023, a family of three in Munich and Hamburg had to earn 10.000 euros before tax to be able to buy a home in their city.
In 80 other cities across the country, Immowelt calculated that only a monthly family income of over 5.000 euros was enough to be able to afford a 90 square metre house or flat, the size considered big enough for two adults and a child.
Though the cost of buying a house between 2010 and 2023 saw a much steeper increase than the cost of renting, tenants in Germany are also stretched. Rents in the country saw a record increase in the first months of 2023, rising by a nationwide average of 7 percent, according to Immowelt.
Analysis by the German Institute for Economic Research (DIW) has declared Munich, Berlin and Hamburg to be among the worst affected when it comes to price declines. "Until 2022, there was a speculative price bubble in Germany, one of the biggest in the last 50 years," DIW researcher Konstantin Kholodilin said. "Since then, prices have been falling. The bubble has burst."
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