The German housing market has been going through difficult times over the past 2 years. The reasons are economic uncertainty, rising mortgage interest rates and rising prices for construction materials.
Prices are falling for the seventh consecutive quarter. According to the Federal Statistical Office, the house price index fell by 2.6% year-on-year in the third quarter of 2024 (-4.78% adjusted for inflation).
In addition, compared to the beginning of 2024, prices increased by 1.32% in the third quarter (+0.3% adjusted for inflation).
In 2023, the total volume of residential property transactions in Germany amounted to EUR 6.39 billion – 50% less than the previous year. However, demand has been gradually recovering recently.
In the third quarter of 2024, the figures increased by 37% compared to the same period last year. The total was EUR 2.05 billion.
New home prices fell slightly by 0.07% (-2.3% adjusted for inflation) in the second quarter of 2024 compared to a year earlier. The price of secondary real estate decreased by 3.04% (-5.21% adjusted for inflation).
Rental yields in Germany have fallen. The recent strong price growth and the fact that property investments were previously heavily subsidized through tax breaks have had an impact.
According to Eurostat, many Germans rent their homes and only 51% of all German households are owners.
In the fourth quarter of 2024, gross rental yields in large German cities averaged 3.67%, up 0.12% compared to the same period in 2023.
The deficit in the construction sector is being exacerbated by the slowdown in residential construction activity.
In the first three quarters of 2024, the total number of building permits issued fell sharply by 19.3% compared to the same period last year. The number of permits stands at 141,915 units.
Germany has been suffering from an acute housing shortage for decades. In 2022, the total number of building permits fell to 354,403 (-7%), in 2023 - to 260,071 (-26.6%).
Experts say that to cope with the acute housing shortage, it is necessary to build about 400,000 apartments per year.
The European Commission expects Europe's largest economy to grow by just 0.1% this year and another 1% in 2025. Housing prices are expected to continue falling until the end of 2024.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be found HERE