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The GREIX Index - German Real Estate Index - was launched in May 2023 by the prestigious Kiel Institute for the World Economy (IfW), with the goal of making German property prices comparable at regional level, or over a longer period of time. It has attracted considerable attention since its start, including from us here at REFIRE.
The index focuses on 18 major cities, and is fed by data input from numerous 'expert committees' (Gutachterauschüsse), who were selected primarily based on the availability of data. This includes information on purchase price, location, size and year of construction of the property. The index is updated on a quarterly basis. This could be improved significantly when the index's participating chambers of notaries agree on final implementation of the Enova project (electronic notary administration exchange), which is intended to make notaries more digital as part of the Online Access Act.
Kiel Institute
Prof. Dr. Moritz Schularick, President, Kiel Institute for the World Economy (IfW)
"When that happens, you could press the button once a week and update the index," said Moritz Schularick, who took over the management of the Kiel Institute last year and is the initiator of the index, in collaboration with the expert committees on land values, and the ECONtribute Cluster of Excellence research team at the University of Bonn, where Schularick previously worked.
The GREIX Index appeals to us at REFIRE because, like other indices such as EUROPACE which we track, the prices are notarised sales prices i.e. actual prices at which properties were sold, and not speculative or advertised prices, which may or may not have been achieved.
What is latest GREIX survey telling us?
So, what is the GREIX Index telling us about residential house price movements in its latest soundings?
The latest data seems to be suggesting a market in flux, rather than one on the brink of either collapse of recovery. The picture is somewhat nuanced. According to IfW President Schularick, while there is some stabilization, particularly in prices for condominiums and single-family homes, the market remains volatile. "It is still too early to call a bottom in the German property market," Schularick explains, noting that "prices are currently moving sideways."
The GREIX Index highlights significant regional disparities:
In Germany's seven major cities, the property market is showing signs of calming, with modest price changes compared to the previous quarter.
- Cologne and Frankfurt recorded increases of 2.4% and 2.2%, respectively.
- Conversely, Berlin and Stuttgart saw declines of 1.9% and 1.4%.
- Hamburg prices remained stable, with a marginal increase of 0.1%.
Outside the major urban centers, the variability becomes even more pronounced. Eastern cities are generally experiencing declines, while some western cities like Wiesbaden and Münster have noted increases of 6.0% and 4.1%, respectively.
Multi-family homes see steep fall in prices
A particular area of concern is the multi-family home segment, where prices have tumbled dramatically. According to the latest GREIX data, prices in this segment fell by 10.5% over the quarter, a significant acceleration from the 5% drop in the previous period. Schularick points out that this segment's high volatility is influenced by the low number of transactions, suggesting that individual sales or lack thereof can disproportionately affect the market index.
The current market's inconsistency suggests that investors and buyers should approach with caution, particularly in the more volatile segments like multi-family housing. Schularick's analysis indicates that while there are buying opportunities, they come with increased risk due to the ongoing mismatch between supply and demand. He cautions that the property market has not provided a robust return on investment over the past two years when adjusted for purchasing power.
Despite the current challenges, there is a cautious optimism about market stabilization in the latter half of the year, supported by the Association of German Pfandbrief Banks (VdP). This outlook is tentatively backed by improving conditions for financing, as interest rates begin to ease, potentially making loans more accessible and stimulating the market.
