Residential property prices in Germany continued their decline, registering a 10.2% drop in the third quarter compared to the previous year, marking the fourth consecutive quarter of declines. This decline is the most significant since Germany began recording such data in the year 2000, highlighting the severe challenges faced by the real estate sector in the country, currently undergoing its most substantial property crisis in decades.
According to Konstantin Kholodilin from the German Institute for Economic Research (DIW), there was a speculative price bubble in Germany until 2022, representing one of the largest in the past 50 years. However, prices have been on a downward trend since then, indicating the bursting of the bubble. The property sector had experienced a boom in Germany and across Europe due to low-interest rates and robust demand. However, the scenario changed with a significant increase in rates and costs, leading to a cessation of the boom, causing developers to face insolvency as financing options dwindle and transactions come to a halt.
The third quarter witnessed a particularly pronounced decline in the prices of single- and two-family homes in major German cities, with a 12.7% decrease, while apartment prices fell by 9.1%. Additional data revealed a 6.3% seasonally adjusted drop in orders for the construction industry in October compared to the previous month. The German Construction Industry Federation expressed concerns about a potential reduction in jobs in the home construction sector.
