Slight rise in prices for owner occupied dwellings in Germany continues in the first quarter of 2012

Development on office property markets also positive

Prices for owner occupied houses and condominiums in Germany rose slightly in the first three months of 2012, too, continuing the trend observed since 2010. The Price Index for Owner Occupied Housing published by the Association of German Pfandbrief Banks (vdp) advanced by 0.8 percent in the first quarter of 2012 compared with the previous quarter, rising to 112 points (basis of all indices: 2003 = 100). With that, the index was 2.6 percent up on the first quarter of 2011.

In the first three-month period of the current year, prices for both single-family and semi-detached houses as well as for condominiums saw an increase. Compared with the previous quarter, the price index for single-family and semi-detached houses climbed by 1 percent. Posting an increase of 0.5 percent over the previous quarter, the development in the market for condominiums was somewhat more muted. However, compared with the first quarter of the previous year, prices in both market segments went up by roughly the same rate (2.6 and 2.5 percent respectively) in the first three months of 2012. As a result, the two indices for owner occupied housing continue on the whole to follow a slightly upward-sloping path. Again, one reason for this is the persistently positive economic activity in Germany. This factor together with rising household incomes and financing conditions, which remain very favorable, are stimulating demand for residential properties. According to available data, the vdp so far sees no indication of an excessive general rise in prices on the German residential property markets having uncoupled from economic fundamentals.

The up-beat economic and employment situation also supported demand for office premises, so that the performance of the office property market was also positive. At the beginning of 2012, the vdp Capital Value Index for Office Buildings climbed to 115.2 points, which was 0.4 percent higher than in the previous quarter. This increase was due to rising rents for office space, reflecting the growth in demand for office properties. The vdp Rent Index for Office Buildings was 0.4 higher than in the previous quarter and 3.9 higher than in the corresponding period one year before; the empirical Cap Rate Index was unchanged vis-à-vis the previous three-month period.

“The upward trend that we have seen for two years now is driven by demand, particularly where owner occupied houses and condominiums are concerned. For property investors such as young families, favorable income and economic prospects paired with historically low interest rates make for attractive conditions. In this market, demand is concentrated above all in metropolises with a strong economy. The market for office properties, too, is roughly in step with economic developments. Given the uncertainties on the financial markets, especially with regard to the debt crisis, real estate continues to profit from the fact that investors and self-users consider it a relatively safe investment. We therefore expect the – on the whole, healthy – development of prices for properties in Germany to continue,” said Jens Tolckmitt, Chief Executive of the vdp.

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