Data published by the VDP banking association showed that in the 1st quarter, the real estate price index decreased by 5.3% per annum and by 0.3% in quarterly terms. Compared with the highest index score to date, reached in the second quarter of 2022, the price correction amounts to 10.3% in the meantime.
For many years, the real estate market in Europe, and especially in Germany, has been growing rapidly due to low interest rates, which has led to increased demand. But a sudden spike in interest rates and construction costs led to the bankruptcy of some developers, as bank financing dried up and deals froze. Germany is so far Europe's hardest hit in a rout, and the country's real estate sector is currently experiencing its worst crisis in decades.
VDP stated that residential real estate prices fell in the 1st quarter by 4.3% per annum and by 0.2% compared to the 4th quarter of 2023. Compared to the record level (2nd quarter of 2022), prices in this segment fell by 8.6%. The data also showed that commercial real estate prices decreased by 9.6% per annum and by 0.8% in quarterly terms, while compared to the 2nd quarter of 2022 they fell by 17.2%. Meanwhile, VDP warned that as yet there is no sign of commercial property prices bottoming out.
“The development of prices confirms our prediction that prices will continue to fall – for commercial properties more heavily than for residential properties. A quarter-on-quarter comparison indicates that residential property prices are already gradually stabilizing", Vdp Chief Executive Jens Tolckmitt commented.