Germany Residential Real Estate Market Trends

Statistics for the 2023 & 2024 Germany Residential Real Estate market trends, created by Mordor Intelligence™ Industry Reports. Germany Residential Real Estate trend report includes a market forecast to 2029 and historical overview. Get a sample of this industry trends analysis as a free report PDF download.

Market Trends of Germany Residential Real Estate Industry

Strong Demand and Rising Construction Activities to Drive the Market

Germany has approved the construction of 24,500 houses until March 2023. According to the Federal Statistical Office (Destatis), this represents a decline of 10,300 construction permits, or 29.6%, from March 2022. Since May 2022, the number of new residential permits issued has been lower than in the same month the previous year, with the year-on-year fall reaching 10% since October 2022 and exceeding 20% since January 2023. In March 2007, The last time there was a greater year-on-year loss than in March 2023 was in March 2007 (-46.5% on March 2006).

From January to March 2023, 68,700 residential building licenses were issued, a decrease of 25.7% from the same period the previous year (January to March 2022: 92,500 building permits). The high costs of construction materials and poor financing circumstances are anticipated to remain the primary factors in the fall of building projects. The outcomes include building permits for new houses and new dwellings in existing buildings.

In recent years, the migration crisis and strong economic growth have added to the already strong demand in the country. Consequently, foreseeable structural changes, such as demographic effects, are also perceived as important drivers of demand. Most recently, the supply side was the main obstacle to further growth. However, the political uncertainty regarding new government constellations and the high investment pressure of many market participants have tempted some portfolio holders to bring products to the market in the second half of the year.

The status of the public finasignificantly impactsct on civil engineering, and infrastructure investment is crucial. Due to decreasing business investment in commercial, retail, and office buildings, the non-residential segment's performance has remained modest. Over the past twelve months, most German construction companies have reported stable or marginally better results. Given the benign demand environment, the prognosis for profit margins is stable now, and price wars are being avoided. However, persistent material shortages and unstable input prices continue to be problems. Without contract escalation clauses, builders find it challenging to pass price hikes on to clients. Future profit margins may suffer as a result.

Germany Residential Real Estate Market: City Center Apartment Price and Monthly Rent for 120 sq. meter, In EUR Thousand, by City, Germany, 2021-22

Rising House Prices in Germany Affecting Demand in the Market

Germany's Federal Statistics Office (StBA) stated on Friday that housing expenses in the country fell by the most in a single quarter in 16 years in the fourth quarter of 2022. Rising inflation and bank interest rate hikes to curb it were mentioned as reasons for the unexpected turnaround. The news was backed by data indicating that housing prices in urban and rural regions declined by 3.6% on average. A similar decline occurred in the first quarter of 2007 when they fell 3.8%. Until the drop in Q4 2022, German home prices had risen since 2010. The StBA stated that the price decrease may be attributed to a similar reduction in demand due to increasing finance costs and continued inflation. Prices for single-family houses and city duplexes declined 5.9% in Q4 2021. Apartment prices fell by an average of 1%. House prices in rural regions declined by 5.5%.

Prices for homes (2.9%) and apartments (1.6%) declined in Germany's seven most populated cities: Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, and Düsseldorf. In densely populated rural areas, the price of single and two-family dwellings rose by 12% in the third quarter of 2021 compared to last year. The cost of condominiums in these areas increased by 12.3%. In less densely populated rural areas, prices for single and two-family homes rose by 15.5%, while condominiums rose by 11.2%.

Experts have identified several reasons why house prices continue to rise so rapidly. Over the past decade, low interest rates, increasing demand, a lack of investment opportunities, and a strong economy have contributed to Germany's rising house prices. Construction costs have also increased significantly, with prices rising for building materials such as wood, concrete, and steel. The construction industry is facing labor shortages.

Germany Residential Real Estate Market: Housing Price Index, in Units, Germany, Jun 2022 to April 2023

Residential Real Estate Market in Germany Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029)