They say there are two things that are certain in life: death and taxes. Well, in Germany, it's probably safe to add rising house prices to that list too. In the third quarter of 2021, house prices in Germany rose by 12 percent, compared to the same period last year.

House prices in Germany still on the rise

If there is one thing we know about Germany’s housing market, is that it continues to get more and more expensive. On Wednesday, the Federal Statistical Office (Destatis) announced that, in the third quarter of this year, house prices rose by an average of 12 percent compared to the same period last year. This, despite the ongoing coronavirus crisis, is even an increase on last quarter, in which prices rose by 10,8 percent, and denotes the largest price increase since records began in 2000.

The Wiesbaden-based institute recorded a price increase of 14,5 percent for houses and apartments in Germany’s seven largest cities: Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf.

Prices have not only been skyrocketing in cities though. The cost of buying a house has also been increasing in rural areas too. In densely populated rural areas, the price of single and two-family houses rose by an average of 12 percent in the third quarter of 2021, compared to the same period last year. The price of condominiums in these areas rose by 12,3 percent. In less densely-populated rural areas, prices for single and two-family homes rose by an average of 15,5 percent, whilst the price of condominiums rose by 11,2 percent.

Why are house prices getting more expensive?

Experts have identified a number of reasons why house prices continue to rise so rapidly. Over the past decade, low interest rates, increasing demand, a lack of investment opportunities and a strong economy have all contributed to the rising house prices in Germany. The cost of construction has also increased significantly, with prices rising for building materials such as wood, concrete and steel. The construction industry is furthermore facing labour shortages.

The pandemic has also had a hand in the rising house prices. With more and more people working from home, and businesses realising that productivity can still remain at a high level, more and more people are moving away from the cities, looking for cheaper, nicer houses in the countryside. However, this has led to an increase in demand, which has contributed to driving house prices up.

In general, demand for housing has increased all over the country. This is mainly due to a significant influx of people in metropolitan areas and, more recently, in rural areas as well. The lower interest rates mean people can afford higher prices but, unfortunately, this has led to a sustained increase in housing prices – what could be called a real estate bubble. Experts believe that the bubble could burst, leading to house prices falling. However, when this does happen, prices do not fall as low as they were before.