German Housing prices continue to rise, development stable for office premises

vdp Property Price Indices show moderate to strong growth rates in the third quarter of 2012, depending on property type

Prices for owner occupied houses and condominiums in Germany rose further in the third quarter of 2012. The upward trend in rents for both residential and commercial properties also continued. The vdp Property Price Indices for the third quarter show moderate to strong growth rates, depending on the type of property. The increase was particularly pronounced in the case of condominiums, with prices rising by 1.3% against the previous quarter and by 4.1% against the corresponding quarter one year before. A marked increase was also observed in rents for apartments, the development of which the vdp calculates in a separate index. Apartment rents were up by 1% quarter-on-quarter and 2.6% higher than in the third quarter of 2011. The price rise in owner occupied houses was clearly more moderate (+0.1% quarter-on-quarter and +2.3% over the third quarter of 2011), as well as for office rents (+0.2% against the previous quarter and +2.9% against the corresponding quarter one year earlier).  

The fact that the increase is concentrated on prices for condominiums and on apartment rents is in line with the observation that, over the last few years, interest in property has mainly been focused on urban housing markets. In contrast to rural areas there have been, overall, appreciable increases in urban population – although differences do exist between individual towns and cities. Against the background of rising, yet still comparatively modest new construction activity, these increases have in total led to considerable market tension. Another factor is that, in the wake of recent capital market developments and the financial crisis, interest has risen perceptibly in real estate as an investment form. Rising apartment rents and prices for condominiums are the result. “The parallel development of prices for condominiums and new rental contracts for residential properties is an important indication of the stability of the housing market. The continuing price increase is still based on sound fundamentals. The risk of a price bubble in Germany as a whole is slight, although individual local markets are currently registering a very strong pick-up in demand,” said Jens Tolckmitt, Chief Executive of the vdp.

The markets for office premises are currently characterized by a weaker real economic development. In particular, the relatively slight rise in office rents reflects cautious hesitancy in demand for office property that corresponds with the present and expected downturn in economic activity. The investment market presents a similar picture. Property rates are unchanged compared with the previous quarter, indicating buying behavior that is driven by market sluggishness and a lack of growth stimuli.

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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