Crisis in the German real estate market: The sharpest decline in history occurred

Crisis in the German real estate market: The sharpest decline in history occurred

The German Mortgage Banks Association (VDP), which provides mortgage housing finance in Germany, announced house price data for the whole of last year and the last quarter.

Accordingly, the end of the crisis in the German real estate market is still in sight. Housing prices fell by an average of 1.6 percent in the fourth quarter of 2023 compared to the previous quarter. Compared to the same period in 2022, there was a decrease of 6.1 percent.

German commercial real estate prices decreased by 4.9 percent in the last quarter compared to the previous quarter and by 12.1 percent on an annual basis, recording the sharpest decline since records have been kept. This was recorded as a 16.5 percent decrease in prices that peaked in the second quarter of 2022.

In his assessment of the issue, VDP Chief Executive Officer Jens Tolckmitt said, “Despite frequent public speculation, the reversal of the trend in real estate prices does not yet appear. The situation will continue to be difficult in 2024.” he said.

“The social problem of not being able to find a rental apartment will grow”

The real estate sector has gained momentum in Germany for many years as interest rates decreased and demand increased. However, the European Central Bank’s (ECB) struggle with increasing interest rates against high inflation negatively affects the real estate sector. High interest rates also cause problems in the economy by making investments in construction and other sectors more expensive.

Material costs have also increased significantly, making many projects unprofitable for builders. Difficult financial conditions and cancellation or suspension of construction agreements also led some construction companies to bankruptcy.

The Association of Real Estate and Housing Companies (BFW) demands that the German federal government take measures due to the crisis.

According to experts, this will cause affordable housing to remain insufficient, especially in big cities, in the coming years, and the social problem of not being able to find “apartment for rent” will grow.

On the other hand, the crisis in the construction sector also puts a strain on the German economy. The German economy shrank by 0.3 percent last year compared to the previous year due to high inflation affecting unusual purchasing power, high energy prices, weak foreign demand and high interest rates.

The economic outlook for this year remains uncertain in Germany, which is struggling to emerge from the ongoing contraction in the economy.

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