Residential property prices in Germany see biggest decline in 23 years

Berlin [Germany], June 24: Prices for residential real estate in Germany fell by an average of 6.8 percent year-on-year in the first quarter of 2023, the biggest decline since the start of data collection in 2000, the Federal Statistical Office (Destatis) said Friday.
The biggest decrease was seen in Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart and Dusseldorf, all prime metropolitan locations, according to Destatis. Here, prices for one- and two-family houses fell by 10.4 percent, while prices for apartments were down 6.4 percent.
"Lower demand due to higher financing costs and the persistently high inflation are probably still the main reasons for (this trend)," Destatis said in a statement.
Inflation in Germany slowed to 6.1 percent in May, according to official figures. For several months now, food prices had the biggest impact on overall inflation, but prices for real estate maintenance and repair also had a sharp increase of 15.8 percent.
The situation in the German housing sector has been "becoming increasingly tense" as the sentiment index of the real estate industry in the second quarter slipped by 5.6 points compared to the start of the year, according to an economic survey published on Friday by the German Property Federation (ZIA).
"The unfavorable market environment, with interest rates currently too high in relation to real estate expenses, is becoming an increasingly heavy burden for companies - and ultimately for society as a whole," ZIA said in a statement.
The number of new building permits have been falling at an increasing rate for the last twelve months. In April, 31.9 percent less permits were issued year-on-year, for 21,200 new homes, according to the latest official figures.
Due to these trends, experts believe that the Germany's government will continue to fall short of its target of 400,000 new homes per year. According to a recent estimate by the ifo Institute for Economic Research, the number of annual completions will actually drop to 175,000 by 2025.
"Residential properties remains the major headache for the construction industry," Felix Pakleppa, chief executive of the German Construction Federation, said Friday, warning that the "downward slide seems to continue unabated."
Source: Xinhua