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vdp property price index: Residential property prices continue to rise

Berlin, August 10, 2021

vdp property price index climbs to 188.5 points

The property price index published by the Association of German Pfandbrief Banks (vdp) reached a new record high of 188.5 points in the second quarter of 2021 (base year 2010 = 100 points). The vdp calculated that property prices rose by 8.0% in total year on year after analysing property transaction data from more than 700 financial institutions for the German market as a whole.

“Residential property is experiencing consistently high demand and supply cannot keep up.” Jens Tolckmitt

“The COVID-19 pandemic has been with us for 18 months now and is affecting all areas of life, including the property market,” said vdp Chief Executive Jens Tolckmitt. “This is particularly apparent with residential property. Since the lockdowns, more and more people want to own their own home. Unfortunately, supply still cannot keep up with this strong demand, which is leading to a further rise in residential property prices,” Tolckmitt said. This is exacerbated by the fact that investors have been focusing on German residential properties for some time, owing to the prolonged period of low interest rates.
In contrast, commercial property prices declined slightly year on year, although they have recorded a sideways movement to date in 2021. A growing divergence in price trends between the individual property market segments was already emerging before the COVID-19 crisis in retail properties, for example, and the pandemic is acting as an additional catalyst here.

Overview of changes in prices from Q2 2020 to Q2 2021:

Residential/commercial properties overall: +8.0% 
Residential properties in Germany: +10.7% 
Residential properties in the top 7 cities: +9.0% 
Commercial properties: -1.1%
- Office properties: -0.4%
- Retail properties: -2.6%

Condominiums have recorded the strongest growth in prices

Overall, residential property prices grew by 10.7% year on year in the second quarter of 2021. With an increase of 10.5%, multi-family houses contributed slightly less to this growth than owner-occupied housing (+10.9%). Here, in turn, condominiums recorded stronger price increases (+12.9%) than owner-occupied homes (+10.4%).

Top 7 cities: residential property prices up by 7.5%

The top 7 cities of Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart recorded average growth of 7.5% in residential property prices in the second quarter. Cologne registered the largest increase among the top 7 cities of 8.3%, ahead of Hamburg (8.1%), Düsseldorf and Munich (each 7.5%).

Commercial property prices experience a sideways movement

Developments in commercial property prices in the second quarter reflect ongoing uncertainty about future demand. While prices fell 1.1% compared with the corresponding quarter of the previous year, they recorded a minimal increase of 0.1% compared with the first quarter of this year, which suggests a sideways movement overall. Prices for office properties were down 0.4% year on year, but up slightly by 0.5% compared with the first quarter of 2021. Measures taken to contain the pandemic once again had a significant impact on retail properties, with prices falling by 2.6% year on year, although they were down only 0.8% in relation to the first quarter of 2021. The index of rents under new contracts in the retail sector declined by 1.5% compared with the second quarter of 2020 and by 0.9% compared with the first quarter of this year.