Slowdown in rate of German property price rises - VdP
German property price increases slowed in third quarter to 7.3% as against the same period a year ago, decelerating from 8.3% year on year in 2Q18 and 8.8% in 1Q18. However, the Pfandbrief bank association sees no turnaround yet in the ongoing rising trend.
The Association of German Pfandbrief Banks (VdP) said that its latest index, calculated on the basis of real transaction data in both commercial and residential property, advanced by 7.3% compared with the corresponding quarter one year before.
In housing, average Germany-wide prices rose by 7.4% year-on-year compared with the third quarter 2017. This growth was driven in part by multi-family buildings, which recorded a 6.8% year on year rise in price, and by owner-occupied housing, which climbed by 8.1%. Not surprisingly, with a value increase of 8.8% year on year, Germany’s top seven housing markets showed a stronger pace of price growth than the market as a whole. Strong population rises over the last few years, notably in Germany’s large cities and towns attracting new inhabitants, continue to feed the heavy demand for housing.
Despite the overall slowdown in residential prices, VdP CEO Jens Tolckmitt commented: “It is still too soon to speak of a turnaround. If this development were to continue however, it would confirm our forecast at the beginning of the year of a slowdown in price appreciation. As before, we do not expect a hard correction in the housing market.”
In third quarter, the discrepancy between the growth rates of the top seven urban regions and the overall market was less pronounced than in previous quarters. This is partly attributable to the fact that strong price increases have reached metropolitan areas outside the Big Seven too, whereas value growth in the major metropoles is showing signs of flattening.
Prices for commercial properties appreciated by 6.8% year on year in 3Q18. Once again, growth in this sector is being spurred by demand for office premises – where the index surged by 9.6% year on year. Prices for retail premises rose much more modestly, up by just 1.5% compared with the corresponding quarter one year earlier.
Thus, price growth remains on an upward trajectory compared with the previous year, the VdP said. At the same time, growth momentum has flattened slightly in the individual market segments so far during the course of 2018. “In view of the price levels already reached, an increase of 7.4% in the German housing market continues to point to dynamic growth,” Tolckmitt added.