vdp property price index: Property prices end 2024 with a plus

vdp index shows year-on-year increase of 1.8% in fourth quarter of 2024

After German property prices declined in 2023, they recovered slightly in 2024. The property price index of the Association of German Pfandbrief Banks (vdp) rose to 178.4 points in the fourth quarter of last year. This was 1.8% above the level for the fourth quarter of 2023. Compared with the immediately preceding quarter, prices went up by 0.6%.

The figures used to calculate the vdp index have been collected by vdpResearch each quarter since 2010. They track price developments on the entire German market for residential, office and retail properties and – unlike other price indices – are based on an analysis of actual property transaction data from more than 700 credit institutions.

The main driver of the price increase in the fourth quarter of 2024 was the positive development in residential property prices, which were up by 2.1% compared with the closing quarter of 2023. From the third to the fourth quarter of 2024, the rate of growth came to 0.7%. For the first time since mid-2022, prices for commercial properties, which is to say office and retail property prices, together also grew compared with the corresponding quarter one year earlier (+0.5%). Commercial property prices were 0.3% higher than in the immediately preceding quarter.

“The development of property prices is again positive across the board, but there is still no sign of a dynamic upward trajectory.”
Jens Tolckmitt

“The development of property prices was again positive across the board in 2024, thereby solidifying the stabilization that set in several quarters ago. This is quite remarkable given the overall economic and geopolitical conditions,” vdp Chief Executive Jens Tolckmitt pointed out. “But there is still no sign of a dynamic upward trajectory. Reticence continues to characterize the commercial property market in particular. We are still seeing a sideways movement there.”

Residential properties: multi-family house prices rise appreciably

The 2.1% increase in German residential property prices compared with the fourth quarter of 2023 was mainly attributable to the positive development in prices for multi-family houses, which advanced by 2.9% in the same period compared with the fourth quarter of 2023. By contrast, price growth for owner-occupied housing, which includes single-family houses and condominiums, was somewhat lower at +1.2%. When comparing prices with the immediately preceding quarter, growth rates of +1.1 % for multi-family houses and +0.3 % for owner-occupied homes were recorded. Taken together, both developments resulted in a rise in residential property prices by 0.7% from the third to the fourth quarter of 2024.

As a result of the ever-increasing housing shortage in Germany, in addition to the observed price growth there was also a renewed rise in rents under new contracts for multi-family houses, namely by 4.6% year on year and by 1.0% quarter on quarter. Returns on rental properties as measured by the vdp index for cap rates grew by 1.6% compared with the fourth quarter of 2023. This was the smallest increase in returns since the third quarter of 2022.

“It is utterly incomprehensible that housing policy is playing only a minor role in the election campaign.”
Jens Tolckmitt

“It is utterly incomprehensible that housing policy is playing only a minor role – if any – in the current Bundestag (lower house) election campaign. The creation of more living space is one of today’s most pressing political and social issues, and harbours great potential for social conflict. The new federal government will have its work cut out in swiftly implementing far-reaching and targeted measures to stimulate housing construction, particularly in large cities,” Tolckmitt remarked.

Housing in top 7 markets: Prices up across the board, year on year and quarter on quarter

In the fourth quarter of 2024, prices for residential properties in Germany’s top 7 cities rose somewhat more strongly than in the country as a whole. Residential property prices in Berlin, Cologne, Düsseldorf, Frankfurt am Main, Hamburg, Munich and Stuttgart increased by 2.3 % on average compared with the fourth quarter of 2023. Measured against the immediately preceding quarter, prices in the metropolitan areas rose by an average of 0.9%.

All of the 7 top cities reported price increases both year on year and quarter on quarter. Compared with the fourth quarter of 2023, growth was most pronounced in Cologne (3.8%), whereas only slight growth rates were seen in Stuttgart (0.3%) and Düsseldorf (0.8%). Compared with the third quarter of 2024, price increases for residential properties in the seven metropolitan areas ranged from 0.4% in Stuttgart to 1.4% in Cologne and Munich.

Rents under new contracts for multi-family houses were up across all top 7 cities, rising by an average of 3.9%. The smallest increase was recorded for Cologne (2.6%). Stuttgart, on the other hand, saw the strongest increase in rents under new contracts (4.6%), followed by Berlin (4.4%). Growth in returns as measured by the vdp cap rate index averaged 1.4% in the top 7 cities compared with the fourth quarter of 2023, although the individual growth rates were mixed. Whereas returns fell in Cologne (-1.5%), they rose in the other six top cities, especially in Stuttgart (+4.0%).

Commercial properties: office prices edge up again for the first time since 2022

Office property prices in particular contributed to the slight increase in commercial property prices, which rose by 0.5% year on year and by 0.3% quarter on quarter.    Between the fourth quarters of 2023 and 2024, office prices went up by 0.7%. This was the first year-on-year increase in prices for office premises since the third quarter of 2022. Compared with the immediately preceding quarter, office prices saw only minimal growth of 0.2%. Retail property prices contracted slightly
(-0.2%) in the fourth quarter of 2024 compared with the fourth quarter of 2023. By contrast, retail property prices were 0.4% higher than in the third quarter of 2024.

Office and retail properties saw both returns and rents under new contracts pick up in the final quarter of 2024. While office rents rose by 2.7%, rents for retail properties increased by 3.0% – compared with the fourth quarter of 2023 in each case. Returns as measured by the vdp cap rate index grew by 2.0% for office properties and by 3.2% for retail properties year on year.

Outlook: “Germany needs to strengthen its competitiveness”

The incumbent federal government recently revised its economic forecast downwards again considerably, and now expects the economy to grow by only 0.3% in 2025. The German economy actually contracted in the years 2023 and 2024. Against this backdrop, Tolckmitt emphasized: “Germany faces a decisive year. It must finally succeed in creating tangible economic-policy impulses. This would strengthen Germany’s competitiveness and stimulate economic growth, thereby having a positive impact on the property market, too.”

“A reliable estimate of future price trends is subject to great uncertainty.”
Jens Tolckmitt

He added that a reliable estimate of future price trends is subject to great uncertainty. Much will depend, he explained, on economic developments and on whether investor demand picks up in the coming quarters. Moreover, Tolckmitt pointed out that the long-term effects of mobile working on the use of office properties remain uncertain.