vdp property price index: Prices for residential and office properties continue to increase

Berlin, May 10, 2022

vdp property price index reaches new high

Property prices in Germany rose by 8.8% year on year in the first quarter of 2022, with the property price index published by the Association of German Pfandbrief Banks (vdp) reaching a new record high of 190.8 points (base year 2010 = 100 points). The index is based on vdpResearch’s quarterly evaluation of actual property transaction data from more than 700 credit institutions.

The strongest growth was again in residential property prices, which rose 10.7% across Germany. Prices for commercial properties increased for the second time in a row, rising 1.8%. This trend was driven by prices for office properties, which increased by 3.9% in the first quarter of 2022 against the same quarter a year earlier. By contrast, prices for retail properties decreased by 3.2% compared to the prior-year period.

"The upswing in the German property market continues. To date, no immediate effects from the war in Ukraine are discernible. However, it remains to be seen what the second- and third-round effects will be.” Jens Tolckmitt

“Germany’s property market is still enjoying an upward trend – despite the fact that the pandemic is not over and a highly unsettling exogenous shock has materialised in the form of Russia’s war of aggression against Ukraine. But even if there are not yet any signs of an impact on the local property market, only time will tell what second- and third-round effects may appear over the next few quarters,” said vdp’s Chief Executive, Jens Tolckmitt.

Overview of changes in prices from Q1 2021 to Q1 2022:

Residential/commercial properties overall: +8.8%    
Residential properties in Germany: +10.7%    
Residential properties in top 7 cities: +11.2%    

Commercial properties: 1.8%
- Office properties: +3.9%
- Retail properties: -3.2%

Continued high demand for owner-occupied housing

Demand for residential properties in Germany continued to be high in the first quarter of 2022, with prices up by 10.7% compared to the same quarter of the previous year. The increase was attributable to the rise in prices for owner-occupied housing (+12.5%) and for multi-family houses (+9.1%). Rents under new contracts increased by 3.7%. The cap rate dropped by 4.9%.

Prices in top 7 cities increased by 11.2%

The increase in prices seen in the top 7 cities was slightly higher than in Germany as a whole, with residential property prices in these markets rising by an average of 11.2% in the first quarter of 2022 compared to the prior-year quarter. Berlin, Cologne and Munich reported the most pronounced price increases at 12.5%, 11.9% and 11.5% respectively, followed by Hamburg (+10.2%) and Stuttgart and Düsseldorf (each reporting an increase of +9.4%). Price growth was somewhat lower in Frankfurt am Main (8.5%).

Office and retail properties not in lockstep

The different trends seen in the two commercial property segments, office and retail, in the first quarter of 2022 were not restricted to prices. Compared to the same quarter the previous year, the index for rents under new contracts fell by 2.0% for retail properties, whereas it increased by 1.6% for office properties. The cap rate index for office properties fell accordingly by 2.2%, while the index for retail properties rose by 1.3%.

Outlook: “Price trend will flatten out”

For the coming quarters, Tolckmitt assumes, based on today’s situation, that the current trend will continue: “Property prices are likely to rise further, primarily because the supply of residential properties cannot keep up with demand,” says Tolckmitt. “However, due to current price and rent levels and increasing interest rates, the price momentum will slow.” He noted that one factor behind the uncertainty was the possible impact of the Russian war of aggression against Ukraine and its consequences for individual asset classes and their price trends, which were still unknown.