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Prices for residential and office properties in Germany increase markedly in 2012

  • vdp property indices: residential property prices up by 4% in 2012, office properties by 4.5%
  • vdp Chief Executive Jens Tolckmitt: price increase led by fundamentals

Prices for both residential and office properties remained on an upward path in 2012. In the fourth quarter of 2012 the vdp’s overall index for housing advanced to 113.6 points, the highest reading since measurements began in the first quarter of 2003; this is equivalent to an increase of 4% year on year. Particularly prices for condominiums saw above-average increases in 2012. Compared with the previous year, they went up by 5.8% and the index rose to 117.7 points. The increase in prices for single-family and semi-detached houses was somewhat weaker. They rose by 2.6% year on year and posted an index level of 113.9 points in the fourth quarter of 2012. Multi-family houses also attracted increasingly more investor interest. Here, the capital value index climbed by 4.7% to a level of 112.4 points. The increase was fuelled, above all, by the development seen in new rental contracts, which posted 4.0% growth compared with the year before; this index currently stands at 114.4 points. At the same time, the Cap Rate Index for Multi-family Houses slipped by 0.6% to 101.8 points of late.

“Given the stability of economic activity and the persistently favorable financing conditions, the strength of demand for owner occupied dwellings is undiminished. Although new construction activity picked up slightly, excess demand is still to be observed, particularly in large and university cities. The, on the whole, marked increase in prices continues to be led by fundamentals. For this reason, at present we still consider the acute danger of a housing market bubble forming that might affect the market as a whole to be slight,” said Jens Tolckmitt, Chief Executive of the vdp.                   

The markets for office properties likewise saw a positive development last year. During the course of 2012, the vdp Capital Value Index for Office Buildings climbed by 4.5% to 120 points. The annual results for the year 2012 largely show a slight decrease in space turnover. However, the vacancy rates for office premises were down for Germany as a whole as a result of the – albeit very low – new construction activity. Signs are already emerging of bottlenecks in the supply of modern office properties. As a result, new rental contracts rose by 2.9% compared with the fourth quarter of 2011 to reach 103.2 points at the end of 2012. At the same time, compared with the corresponding quarter in 2011, the Cap Rate Index for Office Buildings fell by 1.6% to 86 points in the final quarter of 2012. This would suggest considerably heightened interest in office property investments.

“The labor market is a key determinant of demand for office space. Accordingly, the comparatively good development in the labor market in 2012 caused the vacancy rate in office properties to dip slightly and new rental contracts to rise,” commented Tolckmitt in conclusion.

Please note:

The time series for the individual indices are to be found on the website of the Association of German Pfandbrief Banks (vdp) at www.pfandbrief.org.

All the vdp Property Price Indices are calculated on a quarterly basis by vdpResearch using hedonic methods, and based on the vdp’s transaction database. Data on property prices and value-influencing factors collected in connection with property purchases financed by vdp member banks have been entered into this database since 2003.

Charts for the individual vdp Property Price Indices

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