vdp at present sees no residential property price bubbles in Germany

Chief Executive Tolckmitt: Price increases can be explained by fundamentals up to now


The Association of German Pfandbrief Banks (vdp) at present sees no signs of a general price development on the German market for residential properties that has decoupled from fundamental economic data. “Throughout Germany, price bubbles are currently not discernible on the residential property markets. The more substantial price increases seen on the markets for condominiums in some German large towns and cities can be explained by fundamentals up to now,” Jens Tolckmitt, Chief Executive of the vdp, emphasized on the fringe of a real estate forum held by the Association in Berlin.


Since 2004, the vdp has systematically collected data on real estate transactions in a database, enabling the Association to track the development of residential property prices in all German administrative districts (Kreise). Dr. Franz Eilers, Head of Property Market Research at vdp’s subsidiary vdpResearch, explained that the 4.8% price increase that has been measured for all of Germany over the last two years for owner occupied housing does not provide any cause for concern against the backdrop of general inflation as well as of income, employment and demographic developments (see Chart 1). “Up until now, two facts that affect the residential property markets have gone almost unnoticed. First, a large number of young people have entered the housing market on the demand side in recent years. Second, the demographic development in Germany has been clearly more favorable of late than was forecast not so long ago,” Dr. Eilers pointed out.


The upswing on the German housing market entered its third year at the beginning of 2012. According to the Association’s information, it has become more broadly based and today is visible both in new housing figures and in the rising number of transactions involving existing houses and condominiums. However, in the vdp’s opinion, a purely nationwide view of prices for residential properties fails to take account of the pronounced regional differences in the markets. The main focuses of the current growth in demand for housing and of the associated price increases are urban concentrations and larger towns and cities. Here, demand is concentrated less on owner occupied houses than on condominiums, with prices last year climbing appreciably more sharply in individual regional markets than in Germany as a whole. In most of the 412 German districts, the rate of increase in prices last year was between 1% and 3% (see Chart 2). This rise is moderate given that consumer prices went up by 2.3% in the same period. However, several markets recorded very much higher price hikes, and the strongest increases were measured in Germany’s three biggest cities: Berlin +8.6%, Hamburg +8.1% and Munich +8.7%.


Overall, these large German cities are characterized by housing market tensions and, in the case of Berlin, by a moderate price level compared with the other cities. Thus, these rates of change, too, have a sustainable basis. It remains to be seen, however, to what extent further price increases, particularly for condominiums in individual large towns and cities, are in step with the development of fundamental market data such as housing vacancy rates and income developments, or whether they are merely driven by expectations.


Attachment to vdp press release

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