vdp index: Rise in prices in the German property market decelerates slightly
- vdp property price index climbs 7.3% in the third quarter of 2018
- Jens Tolckmitt: “It is still too soon to speak of a turnaround. If this development were to continue, however, it would confirm our forecast at the beginning of the year of a slowdown in the appreciation of prices. As before, we do not expect a hard correction in the housing market.”
The increase in prices in the German real estate market continued yet again in the third quarter of 2018. Calculated on the basis of real transaction data, the property price index of the Association of German Pfandbrief Banks (vdp) advanced by 7.3% compared with the corresponding quarter one year before, after increasing by 8.3% in the second quarter and 8.8% in the first quarter.
The third quarter of 2018 saw residential property prices rise by 7.4% as an average for Germany compared with the third quarter one year before. This growth was driven in part by multi-family houses, which recorded a 6.8% rise in prices, and by owner-occupied housing, which went up in price by 8.1%. As expected, with a price increase of 8.8%, Germany’s top 7 housing markets showed a stronger pace of price growth than the market as a whole. Strong increases in population over the last few years, notably in Germany’s large cities and in towns and cities that are attracting new inhabitants, continue to feed the heavy demand for housing.
However, the discrepancy between the growth rates of the top 7 markets and the overall market is less pronounced than in previous quarters. Amongst other things, this is attributable to the fact that strong price increases have reached the metropolitan areas outside the top 7 cities, too, whereas the top 7 are showing signs that price growth is flattening.
Prices for commercial properties appreciated by 6.8% in the third quarter of this year. Once again, growth in this market segment is being spurred by demand for office premises. The price index here surged by 9.6%. Prices for retail premises saw a considerably more moderate development, increasing by 1.5% compared with the corresponding quarter one year earlier.
Thus, price growth remains on an upward trajectory when compared with the previous year. At the same time, growth momentum has flattened slightly in the individual market segments so far during the course of 2018.
“It is still too soon to speak of a turnaround. If this development were to continue, however, it would confirm our forecast at the beginning of the year of a slowdown in the appreciation of prices,” remarked Jens Tolckmitt, Chief Executive Officer of the Association of German Pfandbrief Banks. “As before, we do not expect a hard correction in the housing market.” In view of the price levels already reached, an increase of 7.4% in the German housing market continues to point to dynamic growth,” Tolckmitt added.