Rise in prices for owner occupied housing in Germany accelerates slightly in Q2 2012

vdp price index for office property markets also remains positive

The rise in prices for owner occupied houses and condominiums in Germany accelerated slightly in the second quarter of 2012. The Price Index for Owner Occupied Housing published by the Association of German Pfandbrief Banks (vdp) moved up 1.3 percent in the second quarter of 2012 compared with the first three months to 113.5 points (basis of all indices: 2003 = 100). With that, the index increased somewhat more strongly than in previous quarters. Compared with the second quarter of 2011, the index was up by 3.5 percent. The moderate upward trend observed since 2010 was therefore continued.

In the second quarter of the current year, the prices for single-family and semi-detached houses as well as for condominiums posted an increase. Compared with the previous quarter, the index for single-family and semi-detached houses advanced by 1.1 percent. Up by 2 percent over the previous three-month period, the rise in prices in the market for condominiums was somewhat more pronounced. However, when comparing the second quarters year-on-year, the price increase for single-family and semi-detached houses was somewhat stronger (+ 3.6 percent) than for condominiums (+ 3.1 percent). The Association believes that the continuous upward movement of the vdp indices for owner occupied dwellings reflects the persistently strong desire to live in one’s own four walls. This is also borne out by the growing number of transactions in this segment.

The development of Germany’s economic and employment situation, which remained robust in the second quarter, also supported demand for office premises. As a result, the office property market likewise recorded a positive performance. The vdp Capital Value Index for Office Buildings climbed to 116.6 points; this is equivalent to an increase of 1.2 percent over the previous quarter and 5.8 percent on the year. As in the quarter before, this increase was driven by rising new rental contracts, reflecting the growing demand for office properties. The vdp Rent Index for Office Buildings was, like the overall index, 1.2 percent higher than in the previous quarter and 3.8 percent higher than in the corresponding period one year before. At the same time, the empirical Cap Rate Index was unchanged vis-à-vis the previous three-month period.

“Based on our data, we still do not see any bubble forming on the German residential property markets, although the rise in prices has accelerated slightly. The brisk demand remains the decisive reason for the upward trend we have seen for more than two years now, particularly for owner occupied houses and condominiums,” said Jens Tolckmitt, Chief Executive of the vdp. The financial environment for property investors such as young families remains attractive given the favorable income and economic prospects paired with historically low interest rates. Tolckmitt added that another factor – in view of the continuing sovereign debt crisis – is that an investment in residential property provides wealth protection and is interesting in terms of provisioning for old age. As before, demand in this market is concentrated above all in urban centers with a strong economy. “The office property market, too, is roughly keeping pace with economic developments. Given that the German economy is in good shape, compared in particular with the rest of Europe, we expect this – overall – healthy development of real estate prices in Germany to continue,” Tolckmitt concluded. 

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