In Germany, commercial real estate prices recorded the sharpest decline ever seen since records began, falling by 12.1 percent in the fourth quarter of 2023 compared to the same period the previous year.
The Association of German Mortgage Banks (VDP), which provides mortgage financing for residential properties in Germany, has released data on housing prices for the entire last year and the last quarter.
According to the data, the end of the crisis is still not in sight in the German real estate market. Housing prices dropped by an average of 1.6 percent in the fourth quarter of 2023 compared to the previous quarter. When compared to the same period in 2022, there was a decrease of 6.1 percent.
Commercial real estate prices in Germany recorded the sharpest decline ever seen since records began, with a decrease of 4.9 percent compared to the previous quarter and a 12.1 percent decline on an annual basis.
Jens Tolckmitt, the President of VDP's Executive Board, stated in his assessment of the situation, 'Contrary to speculations frequently made in the public, there is still no sign of a reversal in the trend of property prices. The situation will continue to be challenging in 2024.
"The social problem of being unable to find rental apartments will escalate"
The real estate sector in Germany had gained momentum for many years due to falling interest rates and increasing demand. However, the efforts of the European Central Bank (ECB) to combat high inflation with rising interest rates are negatively impacting the real estate sector. High interest rates are making investments in construction and other sectors more expensive, leading to problems in the economy.
The significant increase in material costs is also making many projects unprofitable for developers. The tightening financial conditions and the cancellation or postponement of construction contracts have also pushed some construction companies into bankruptcy.
The Real Estate and Housing Companies Association (BFW) is calling on the German federal government to take measures due to the crisis.
According to experts, this will especially lead to insufficient affordable housing in large cities in the coming years, exacerbating the social problem of being unable to find rental apartments.
On the other hand, the crisis in the construction sector is also challenging the German economy. The German economy contracted by 0.3 percent compared to the previous year last year due to high inflation affecting purchasing power, high energy prices, weak external demand, and high interest rates.
Germany continues to struggle to emerge from the ongoing economic downturn, maintaining uncertainty in the economic outlook for this year."