Real Residential Property Prices for Germany

Real Residential Property Prices for Germany

• Recent Market Fluctuations: After a peak in 2022, the market experienced a correction. Data shows prices fell -7.1% in 2023 and a further -1.9% in Q3 2024 year-on-year, indicating a market adjustment .

• Monetary Policy Impact: The price decline was triggered by rising inflation and subsequent interest rate hikes, which increased financing costs and reduced affordability . This demonstrates how monetary policy transmits through the housing market into the broader economy.

• Supply and Demand Dynamics: Despite falling prices, a persistent housing shortage exists. Construction completions fell 14.42% in 2024, with building permits at their lowest since 2010 . This divergence between prices and supply can signal underlying structural issues in the economy.

• Indicator for Financial Stability: this illustration emphasizes the importance of long-term property price trends for determining the evolution of financial cycles across countries, using this data for financial stability monitoring .

↔︎️ 2000-2010: A Decade of Stability and Mild Fluctuations In the early 2000s, Germany’s housing market was marked by long-term stability, with the national house price index showing only mild fluctuations . The country largely avoided the speculative excesses and sharp corrections of the 2008-2009 global financial crisis, thanks to structural factors like a high proportion of renters and cautious lending practices . This period was characterized by average annual growth rates remaining below two percent, with several years of negative real, inflation-adjusted movement .

📈 2010-2020: A Sustained Boom Fueled by Low Rates and Demand From around 2010, the market dynamic shifted substantially, triggering a prolonged upswing in residential property values . The combination of ultra-low interest rates, rising urbanization, and strong investment demand led to a period of rapid price growth . Cities like Munich, Berlin, and Frankfurt became focal points of this expansion, with price increases far exceeding the national average . This decade-long boom redefined urban housing affordability in Germany.

Recent Trends: Supply, Inflation, and Market Adjustment (2020-Present) 📉 Market Correction Amidst Supply Disruption and High Inflation The long cycle of expansion gave way to a correction starting in late 2022 . The sharp rise in inflation and subsequent tightening of monetary policy led to a rapid increase in financing costs, significantly reducing affordability . This resulted in notable price declines, with nominal house prices falling by 7.11% in 2023 . The downturn was most pronounced in previously overheated city markets .

🏗️ Persistent Supply Shortfall Despite falling prices, Germany continues to face a persistent shortage of residential units . In 2024, the number of newly built dwellings declined by 14.42% year-on-year, driven by rising interest rates and escalating construction costs . The number of approved dwellings also fell to its lowest level since 2010, indicating a deepening supply-side problem that continues to shape the market .

Real Residential property prices as tracked by the Federal Reserve Bank of St. Louis (FRED).

“Real” Prices: This means the property prices have been adjusted for inflation. The data is “deflated using CPI” (Consumer Price Index) to reflect the true change in property value by removing the effect of rising general price levels.

Coverage: It includes “all types of owner-occupied new and existing dwellings in the whole country”.

Data Format: It is a time series index with a base year of 2010=100. This allows you to easily see how much prices have risen or fallen relative to that year.

Frequency: The data is updated quarterly.

Use Official Codes: When searching on economic databases like FRED, using the specific code QDER628BIS will directly lead you to the “Real Residential Property Prices” series.

Verify Definitions: Always check the “Notes” section of a data series to confirm what it measures. The notes for QDER628BIS clearly state it covers “owner occupied” homes and is “deflated using CPI”.

Real Gross Domestic Product for Germany (CLVMNACSCAB1GQDE)

Total Population for Germany (POPTOTDEA647NWDB)