vdp property price index: Residential property prices continue to increase

Berlin, May 10, 2021

vdp property price index reaches new high of 175.3 points

The property price index published by the Association of German Pfandbrief Banks (vdp) reached a new record high of 175.3 points in the first quarter of 2021 (base year 2010 = 100 points). After analysing property transaction data from more than 700 credit institutions covering the German market as a whole, vdp announced that, compared to the first quarter of 2020, which was still largely unaffected by the pandemic, property prices increased by 6.2% overall.

The trend towards diverging residential and commercial property prices that was already apparent in recent quarters strengthened during the first quarter. While residential properties continued to see large price increases (+8.4% compared to Q1 2020), prices for commercial properties declined for the first time in eleven years in the first quarter of 2021 (-1.5%).

“The German property market is holding its own during the COVID-19 crisis.” Jens Tolckmitt

“One year after the onset of the pandemic, it is clear: the German property market is holding its own during the COVID-19 crisis,” stressed vdp’s CEO, Jens Tolckmitt. “Nevertheless, the impact of the pandemic cannot be dismissed lightly: residential properties are valued even more highly than before the COVID-19 crisis, which is why we continue to see steady price increases in this segment. By contrast, prices for commercial properties are declining for the first time in years, but nevertheless – when compared with the fears expressed at the start of the pandemic – such declines have so far been moderate,” Tolckmitt noted.

Overview of changes in prices from Q1 2020 to Q1 2021:

Residential/commercial properties overall: +6.2%      
Residential properties in Germany: +8.4%    
Residential properties in the top 7 cities: +5.3%    

Commercial properties: -1.5%
- Office properties: -1.2%
- Retail properties: -2.1%

Biggest price increase: for owner-occupied housing

Continued high demand for residential properties caused prices in this segment to increase further, by 8.4% overall. Prices for owner-occupied housing rose somewhat more, by 9.4%, while prices for multi-family houses increased 7.6%. Rents under new contracts increased 2.3%, compared to a 3.9% increase in the first quarter of 2020. The somewhat lower momentum in rents compared to the previous year is due to local regulations that have been adopted in many areas to slow the increase in rents under new contracts.

Top 7 cities: demand continues to be high

The top 7 cities of Berlin, Duesseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart once again reported significant price increases, with overall prices for residential properties up 5.3% and prices for owner-occupied housing up 7.3%. Year-on-year increases in prices for owner-occupied housing were highest in Hamburg and Duesseldorf, at 8.8% and 9.1%, respectively. The average increase in prices for multi-family houses in these seven metropolitan areas stood at 4.8%.

COVID-19 pandemic affects commercial property prices

Prices for commercial properties decreased in the first quarter of 2021 for the first time in eleven years. Overall, pandemic containment measures caused prices in this segment to drop 1.5%. Office property prices were down slightly year on year (-1.2%), while office rents decreased 0.9% over the same period. The decrease in prices for retail properties, which had already started well before the pandemic, was somewhat more pronounced
(-2.1%), but was more or less on the same level as in the two previous quarters. Here, the index for rents under new contracts was down 0.7%.