KIEL (dpa-AFX) - According to the Kiel Institute for the World Economy (IfW), residential real estate prices in Germany have fallen to a historic extent in 2023. It is the sharpest decline since the start of systematic real estate price recording in this country around 60 years ago, the institute announced on Thursday. This applies to all residential segments - condominiums as well as single and multi-family homes. However, most prices had also risen significantly in previous years.

Compared to the previous year, prices for condominiums fell by 8.9 percent, for single-family homes by 11.3 percent and for apartment buildings by 20.1 percent, according to the German Real Estate Index calculated by the IfW and its partners. It is based on purchase price collections of the expert committees, which contain notarized sales prices. Adjusted for inflation, the reduction in value is still around five percentage points higher. Never before since the surveyor committees began collecting purchase prices have real estate prices fallen "so quickly", the researchers wrote.

Previous price slump lasted much longer

During the sharpest price decline to date from the mid-1990s onwards, sales prices fell to a similar extent, but took around ten years to do so. The most recent fall in prices was preceded by another historic real estate boom since around 2009. Since then, prices have risen three to fourfold, depending on the segment, according to the IfW, before the abrupt crash began in 2022 - triggered by a rapid rise in lending rates, which made financing much more expensive. As a result, many people cannot afford to buy a property and investments are no longer profitable for large investors.

"In view of the exorbitant rise in prices for more than 10 years and a new interest rate environment, a phase of price correction is entirely appropriate and not a cause for concern for the economy as a whole," said IfW President Moritz Schularick. "It is possible that real estate prices are just beginning to bottom out. However, only the coming quarters will show this."

Researchers see stabilization in the fourth quarter

According to the researchers, the real estate market stabilized somewhat in the fourth quarter of 2023. Compared to the previous quarter, prices for condominiums only fell slightly by 0.6% on average. Single-family homes became 1.2 percent cheaper. Prices for multi-family houses climbed by 4.7 percent, although the fluctuations here were relatively high due to the low number of transactions, the IfW qualified.

Developments varied in the seven largest cities. In Koln and Stuttgart, prices fell significantly by 3.6 percent each compared to the end of the quarter. In Berlin (-0.4 percent), Frankfurt (-0.2 percent) and Hamburg (+0.2 percent), on the other hand, they remained more or less stagnant. No data was available for Düsseldorf and Munich for the fourth quarter.

Compared to the same quarter of the previous year, the fourth quarter of 2022, prices in all segments were down significantly, according to the data. Official data on property prices from the Federal Statistical Office for the final quarter of 2023 is not yet available./als/DP/mis