The price increase on the German real estate market continues with unchanged momentum.

As the Association of German Pfandbrief Banks (VDP) reported on Tuesday, real estate prices rose by 8.8 percent in the first quarter of 2022 compared to the first quarter of 2021. The real estate price index of the association, to which the most important German real estate financiers belong, reached 190.8 points again a new high (base year 2010 = 100 points).

The price increase has thus accelerated again compared to the 8.4 percent measured in the final quarter of 2021.

Markus Fruehauf

Editor in Business.

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The index is based on a quarterly evaluation of real property transaction data from more than 700 credit institutes carried out by the VDP.

"The real estate market in Germany is still on the upswing - even though the pandemic is still not over and Russia's war of aggression against Ukraine was a highly worrying exogenous shock," explained VDP CEO Jens Tolckmitt.

Even if there are currently no effects on the local real estate market, it remains to be seen to what extent second and third-round effects will materialize in the coming quarters, he added.

Residential property is the most expensive

Residential real estate again recorded the strongest growth in the first three months, rising by 10.7 percent across Germany.

Commercial property prices rose for the second time in a row, up 1.8 percent.

The drivers of this development were the office property prices, which increased by 3.9 percent in the first quarter of 2022 compared to the same quarter of the previous year.

By contrast, prices for retail properties fell by 3.2 percent compared to the same period of the previous year.

At the annual press conference two weeks ago, VDP President Louis Hagen said that real estate prices are expected to continue to rise in the coming years, albeit with a leveling off.

The successively rising interest rates and the associated lower affordability of residential property would have an inhibiting effect on real estate demand, he said.

A weaker economy could weigh on the commercial real estate market.

Noticeable effects on the residential real estate market, on the other hand, can only be expected if there is a massive increase in unemployment.