German house prices experienced their steepest decline since records began in 2000, falling by 9.9% during the April-to-June period of 2023 compared to the same period in 2022, according to data from the Federal Statistical Office (Destatis). This follows a record high in property prices in the second quarter of 2022.
The decline in house prices was particularly notable in Germany’s largest cities. Prices decreased by 1.5% compared to the previous three months, which is less than the declines seen in the two preceding quarters. In the first quarter of 2023, property prices decreased by 2.9% compared to the previous quarter, while in the final quarter of 2022, the decline totaled 5.1%.
The decline in house prices can be attributed to several factors. Firstly, the country’s construction sector has been severely affected by the European Central Bank’s monetary tightening campaign in response to rising inflation. This campaign has led to higher borrowing costs, making it more difficult for potential buyers to afford homes. Additionally, uncertainty over new energy regulations has also played a role in the decline.
Earlier this month, the Germany-based real estate multinational Vonovia warned that the construction sector, which makes up 12% of Germany’s GDP and employs a million workers, was on the brink of collapse. This has raised concerns about the overall health of the country’s economy.
In April, Destatis projected a gloomy outlook for the construction sector, noting that the number of construction permits had been steadily declining since May 2022, dropping by 10% each month from October 2022.
The decline in house prices may have significant implications for the housing market and the wider economy. Lower house prices can make it more difficult for homeowners to sell their properties and can lead to reduced consumer spending and economic activity. It can also impact consumer confidence and sentiment, which are crucial for economic growth.
The German government is closely monitoring the situation and may consider implementing measures to support the housing market and the construction sector. These measures could include policies to stimulate demand, such as tax incentives or subsidies for homebuyers, as well as initiatives to promote investment in the construction sector.
It remains to be seen how the housing market in Germany will evolve in the coming months. However, the current decline in house prices highlights the challenges faced by the construction sector and the potential impact on the country’s economy.
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– “Germany-Destatis: House prices shrink record 9.9% YoY, with biggest cities hardest hit,” RT, [Link to the article]
– “Germany’s construction sector close to collapse, Vonovia warns,” Deutsche Welle, [Link to the article]
– “Destatis: Number of construction permits steadily declining,” Destatis, [Link to the article]