It has to come to an end at some point - that's what many thought when new figures on price increases on the property market were published in the past few months.

But there is no end in sight to the upward trend.

Rather, the price index for residential real estate rose more sharply in the second quarter than it has since the beginning of the time series in 2000.

Apartments and houses were 10.9 percent more expensive than in the same period last year, the Federal Statistical Office reported on Friday.

Compared to the first quarter of this year, the increase was 3.7 percent.

Julia Löhr

Business correspondent in Berlin.

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Especially in the seven largest German cities - Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf - prices rose again sharply.

Houses there were last 14.7 percent more expensive than a year ago, condominiums 12.9 percent.

In contrast, the increase in new lease rents has flattened recently, as a look at the statistics from the analysis company Empirica shows.

In the second quarter, these were on average 4.3 percent higher in Germany than a year ago.

Compared to the first quarter, the price increase was only 1.1 percent.

"There won't be a crash in Germany tomorrow"

If purchase prices rise significantly faster than rents, this is a warning signal for economists: danger of bubbles. Empirica CEO Reiner Braun is still relaxed. The fact that buyers for a property today often pay 40 times what they could ask for annual rental income is "completely okay". Even taking maintenance costs into account, the result is a net return of around 1 percent.

“That is more than with other systems. And compared to shares, the risk of real estate seems to be lower for many buyers. ”Even for owner-occupiers who still rented property, the purchase could still be worthwhile because of the low interest rates on real estate loans. "If the interest rate rises, that can change quickly," warns Braun. He is concerned that the volume of housing loans in relation to gross domestic product has recently increased. In Germany it is currently 46 percent, in Spain the bubble burst at 63 percent during the financial crisis. “There won't be a crash tomorrow in Germany,” says Braun. "But the risk has increased."

For years, the real estate market in the metropolitan areas, whether renting or buying, has met with extremely high demand and comparatively low supply.

The grand coalition could do little to change that.

Instead of the announced 375,000 apartments per year, only around 300,000 were completed.

In the final spurt of the election campaign, it was above all SPD chancellor candidate Olaf Scholz who made this an issue.

He wants to increase the number to 400,000 a year.

History shows that this is possible - even more: in 1973 800,000 apartments were built in Germany.

High purchase costs

That year actually marks the high point of construction activity in Germany so far. The Federal Statistical Office records 810,444 completed apartments, 714,000 of them in West Germany and 96,000 in the GDR. Real estate experts do not consider this comparison to be very useful. “That was a completely different time,” says Michael Voigtländer from the Institute for the German Economy in Cologne. After 4 million homes were missing in the post-war period, society had a different - more open-minded - attitude towards building than it is today. “Building land was much more easily available.” And the construction industry had even more capacity.

Voigtländer is skeptical as to whether the next federal government can turn so much on these levers. Due to the many building regulations - there is now talk of 20,000 - it is difficult to train skilled workers from abroad. At the same time, for reasons of climate protection, as little area as possible should be resealed. "The housing market was more successful when politics interfered less," stated Voigtländer. He would think it would be helpful if at least the comparatively high incidental purchase costs in Germany were to decrease, for example through the tax exemption planned by the Union for real estate transfer tax. A test order for this was already in the coalition agreement of 2018, but nothing came of it. Empirica boss Reiner Braun advises not to focus too much on the number of completed apartments.Many of the “West-Platte” raised in the 1970s - high-rise estates such as Cologne-Chorweiler or Berlin's Gropiusstadt were built - would hardly have a majority today, he suspects. "If you build a lot, you also build a lot of crap."