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Prices on the German property market rise further in the first quarter of 2013

  • vdp property indices: residential property prices up by 3.5%, office property prices by 5.2%

Prices on the German market for owner occupied residential properties rose again in the first quarter of 2013. The Price Index for Owner Occupied Housing went up by 3.4% in the first three months of this year compared with the corresponding quarter one year before. Developments were driven in particular by the market for condominiums, with prices climbing 5.7% year-on-year. Prices for single-family and semi-detached houses saw a somewhat more moderate upward movement, rising by 2.5%.

The development of prices for multi-family houses is tracked by the vdp Capital Value Index. Compared with the corresponding quarter in 2012, this index advanced by 3.7% in the period January to March 2013. A major factor in this increase was the growth in new rental contracts (+4.3%). The Cap Rate Index edged up slightly by 0.5%.

The vdp’s overall index for housing, which is calculated from the partial indices for commercial and owner occupied residential properties, was 3.5% higher than in the first quarter of last year.

“The continuing upward trend in residential property prices may be readily explained by the current supply and demand situation,” commented vdp Chief Executive Jens Tolckmitt. “New construction activity in housing was at an extremely low level for over a decade. Only in the last two years has construction picked up again. At the same time, the persistently robust underlying economic situation in Germany is having a positive effect on the incomes of households and, consequently, on demand for real estate. Demand remains mostly concentrated on large cities in terms of region, and is compounded by historically low interest rates. In addition, residential properties continue to profit from the fact that investors and owner-occupiers consider them a safe investment.”

The offices market last year was characterized by moderate new construction activity and, on the whole, declining vacancy rates. It was due, in part, to these developments that new rental contracts posted an increase of 3.5% in the first quarter of 2013 against the first three months of 2012. The prices for office premises rose somewhat more strongly due to the slight drop in cap rates. Year-on-year, the vdp Capital Value Index for Office Buildings went up by 5.2%. “Because sentiment in the German economic sector has brightened since the beginning of this year, in light of the present supply conditions we expect the rise in new rental contracts to continue for the time being,” Jens Tolckmitt said.

Please note:

All the vdp Property Price Indices are calculated on a quarterly basis on behalf of the Association of German Pfandbrief Banks (vdp) 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.


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