Real-estate inflation

German Housing Prices: Boom Time Over?

  • Why it matters

    Why it matters

    A slowdown in German real-estate price increases may spell an end, or a partial reversal, to the sector’s long-time boom.

  • Facts

    Facts

    • Housing prices in Germany have been rising for years, especially in its biggest cities. In Berlin and Munich alone, they more than doubled in 12 years.
    • For the first time since the housing boom began, price inflation may soon begin to cool.
    • The main reasons for the shift include falling demand, fewer refugees, and more Germans moving to affordable, smaller cities.
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  • Audio

    Audio

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main German housing inflation 32278034
In Germany's competitive housing market, beauty lies in the wallet of the beholder – for now. Source: Reuters

When double-income, no-kids couples can’t afford a mortgage, and high school graduates have to look for colleges based on available living space, there’s something very amiss with the German real estate market. Yet that’s reality in many German cities, where housing prices have kept rising over the past year. With more and more Germans flocking to the country’s biggest cities, affordable housing is increasingly hard to find. But for prospective buyers and renters, there’s light at the end of the tunnel: Prices could soon level off.

That’s according to real-estate analysis firm VDP Research, which in an exclusive study for Handelsblatt, tracked the costs over time of buying or renting a home. It comes on the heels of another respected report saying a German housing-price bubble was unlikely.

In the study, VDP’s analysts evaluated real purchase prices in 16 German cities for owner-occupied apartments and one-family homes, as well as monthly rents. And they identified the most popular neighborhoods in each city, which they defined as areas where average housing prices rose most quickly over a four-year period.

The statisticians found that while housing prices in Germany continued to surge over the past year – especially in big cities like Berlin, Munich and Hanover – a reversal of that trend is in sight. In Berlin and Munich, inflation in these housing prices was in double digits compared with a year ago. In Hanover, the price of an owner-occupied apartment jumped 7 percent on the year. But even in these popular cities, VDP’s research suggests the price increases would soon begin to slow, or even stop.

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