BulwienGesa Index up 3.1%, driven by residential

It’s probably the daddy of the burgeoning array of property indices that now track all aspects of the German commercial and residential real estate markets. The BulwienGesa Index, managed by the market research company of the same name, showed an increase in prices across all market segments in Germany in 2012 of 3.1%. All sectors showed a positive increase, but the biggest driver at 4.2% was, not surprisingly, German residential.

The index was established in 1983 by Hartmut Bulwien, and enjoys broad confidence because of its strict methodology of comparing like with like. The Bundesbank, for example, relies on the index for the statistics it delivers to the European Central Bank across town.

The index tracks increases in rents and purchase prices across nine defined sectors in 125 German cities. For the previous year 2011, the index recorded an overall increase of 3.4% with residential rising by 4.7%, leading the researchers to describe the latest findings as an almost seamless continuation of the previous year’s trend.

For 2012, the highest price rises were recorded for second-hand apartments, which rose by 5.9%, followed by rents in newly-built apartments (up 4.8%), and then rents in existing apartments (3.6%). Housing land rose 3.5%, and prices for terraced houses (3.3%) also outpaced both the market average (3.1%) and the inflation rate of 2%.

The commercial property sector helped to drag down the overall figures. Below the average were retail rents in top shopping locations at 2%, office rents in central business districts rose by 1.6% - in both cases a full 0.5% below the previous year’s figures. Holding up the table were industrial land prices and retail rents in secondary locations, both showing a rise of 1%.

While all sectors just about made it into positive figures, the index for the last twenty years shows German property prices failing to match the inflation rate. Apart from the mini-boom engendered by re-unification in the early-90s, property has lagged inflation – although since 2009, the year after the Lehman collapse, the index has managed to stay ahead of inflation – just.

But it also highlights how the overall price levels in German real estate, inflation-adjusted, are barely ahead of where they were in 1993 – twenty years ago.