Apartments and houses in Germany have become more expensive again at the beginning of the year. As the Federal Statistical Office announced, interested parties had to pay more money both in the city and in the country. According to this, the prices for residential real estate were on average 6.8 percent higher in the first quarter of 2020 than in the same period last year. The Corona crisis, which became more and more noticeable in Germany from March, did not yet have a strong impact on prices at the start of the year. 

According to the house price index, prices for single and two-family houses in the seven largest German cities - Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf - rose by an average of 9.5 percent. Condominiums rose by 7.4 percent within a year, according to the Wiesbaden statisticians. In the other major cities with a population of 100,000 or more, house prices rose by 8.3 percent and those for condominiums by 9.3 percent.

Residential real estate also became more expensive in sparsely populated rural areas: there, the prices for houses rose by 6.1 percent and for apartments by 4.9 percent.

At the same time, the Federal Statistical Office revised the extent of the price increase in the past year: in 2019, the house price index rose by 5.8 percent, 0.5 percentage points more than assumed according to preliminary data. The reason is the subsequent reporting of transactions, especially in the country.

It is controversial whether the boom ends with the Corona crisis. According to the real estate specialist F + B, rents and purchase prices for apartments have barely changed in the Corona crisis. The Federal Association of Deutsche Volksbanken and Raiffeisenbanken (BVR) believes that owner-occupied housing will continue to become more expensive this year by almost five percent. 

Moderate consequences of the Corona crisis for rents

The Institute of the German Economy (IW) expects the Corona crisis to have moderate rents. While the pandemic led to rent deferrals for offices and shops, apartment rents mostly reacted to economic downturns, said IW expert Michael Voigtländer. "Apartments in large cities are still scarce, which is why this segment is likely to come out of the crisis lightly." Few real estate companies experienced high rental losses.

The real estate markets in Germany have been booming for a good ten years. The long period of strong economic activity, rising incomes and housing shortages in cities are driving prices up. Although more and more apartments have been built in recent years, the offer falls short of the demand. In addition, low interest rates make real estate financing cheap. Because large investors can hardly find any profitable investments in times of zero interest rates, they invest a lot of money in properties that are considered to be relatively crisis-proof.