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08/08/2024 08:58

GREIX Q2 2024—Turnaround on German real estate market has begun

Mathias Rauck Kommunikation
Kiel Institut für Weltwirtschaft

For the first time in around two years, German real estate prices have been rising across the board in the second quarter of 2024. All market segments—apartments, single-family homes, and multi-family homes—were increasing in value compared to the previous quarter Q1 2024. Price increases were also outperforming current inflation rates. This is shown by the latest update of the German Real Estate Index (GREIX), a joint project of the local expert committees (Gutachterausschüsse für Grundstückswerte (GAAs)), ECONtribute, and the Kiel Institute. The transaction databases of the GAAs, which contain notarized sales prices, are evaluated according to current scientific standards. (...)

(...) All data for currently 20 cities and regions including their neighborhoods are freely available at www.greix.de (https://www.greix.de/). New in the data is the Rhein-Erft-Kreis.

"The turnaround in the real estate market has begun. The great uncertainty of the past few years and months is clearly subsiding and the prospect of falling interest rates is stabilizing the market. Investors appear to have regained confidence in the long-term appreciation of real estate. In addition, the slump in new construction is tightening supply and thus supporting price momentum," says Jonas Zdrzalek, real estate expert at the Kiel Institute for the World Economy.

Compared to the previous quarter (Q2 2024 vs. Q1 2024), prices for apartments rose by 2.4 percent. Single-family houses increased by 2.0 percent. Prices for multi-family houses even rose by 4.4 percent, after falling by around 10.5 percent in the previous quarter. However, there is a high level of volatility in this segment due to the low number of transactions and the informational value is limited.

Even when adjusted for inflation, real estate was appreciating for the first time in two years.

Compared to the same quarter of the previous year Q2 2023, all residential segments were still facing falling prices, but for the third time in a row the loss is decreasing. This is also a sign of stabilization.

The number of real estate transactions was increasing slightly but was still at a low level and only around 60 percent of the average from 2019 to 2021. For new buildings, the level was only around 35 percent.

Top-7 cities

In Germany's 7 largest cities (Berlin, Düsseldorf, Frankfurt a. M., Hamburg, Cologne, Munich, Stuttgart) the stabilization is evident. Prices for apartments have been rising consistently compared to the previous quarter Q1 2024 or have been stable following previous increases.

Hamburg (+4.3 percent) and Frankfurt (+3.7 percent) saw the highest price increases. Düsseldorf (+2.2 percent) was also clearly becoming more expensive. Prices were slightly up in Stuttgart (+0.6 percent) and against the trend slightly down in Cologne (-0.6 percent), but prices have already risen there in the first quarter of 2024.

Note: No data for the 2nd quarter of 2024 is available for Berlin and Munich in this GREIX update.

Other cities

Outside the top 7 cities the trend is also up, but the market is more volatile overall. This is probably due to the lower number of transactions.

The Rhein-Erft-Kreis, the western environs and catchment area of Cologne, is now included in the GREIX. Prices for apartments here rose by 4.6 percent compared to the previous quarter.

What is striking regarding Germany's medium-sized cities is the renewed, significant increase in value in Münster (+5.6 percent). Apartment prices have already risen by over 4 percent in the first quarter of 2024, meaning that apartments became around 10 percent more expensive in the first half of the year.

Decline since peak

If the trend reversal proves to be true, the large-scale correction on the German real estate market will be over after around two years. During this time, the GREIX, meaning the total of all 20 cities and regions, recorded a price decline of around 14 percent, before the trend has now reversed.

However, the correction period coincided with particularly high rates of inflation, so that the loss in value of in terms of current purchasing power was considerably higher at over 20 percent.

The price drop was strongest in Stuttgart, where house prices fell by more than 20 percent compared to their peak, which meant a price adjusted loss in value of almost 30 percent.

Overall, the price slump for newly built flats was only 6 percent and therefore significantly smaller than the 16 percent drop for existing flats.

"The GREIX data suggests that the real estate sector is regaining momentum and that the market has decided on a direction after volatile months. The slump was short and sharp, it would be surprising if the prices rise at the same pace. If the price turnaround is confirmed, the correction phase would only have been the interruption of a long-lasting upward trend," says Zdrzalek.

Read brief report now: GREIX Q2 2024 (https://www.ifw-kiel.de/publications/news/greix-q2-2024-turnaround-on-german-rea...)

Methodological note

The price development of the GREIX is calculated as an index. This is the only way to use statistical methods (hedonic method) to eliminate distortions that would otherwise occur with average prices per square meter. For example, the sale of a particularly large number of high-priced properties, for example due to a high number of square meters, good location, or good condition, leads to rising average prices per square meter, but such an increase is not based on a general increase in the value of properties. The formation of the index means that there is no upward or downward distortion in the price trend due to specific characteristics of the properties sold.


About the GREIX:

What is the GREIX?
The GREIX is a real estate price index for Germany based on the sales price collection of the local expert committees, which contains notarized sales prices. It tracks the price development of individual cities and neighborhoods back to 1960 and is based on more than two million transaction data. The dataset can be used to analyze long-term trends in the real estate markets and to place current developments in a historical context.

What data and methods are used to create the indices?
The data collection and evaluation take place in cooperation with the local expert committees. All real estate transactions are recorded in full. The price development is calculated according to the latest scientific standards and statistical methods (hedonic regression method). The GREIX thus stands for the highest scientific data quality.

Who finances the GREIX?
GREIX is financed by public funding and is a project of the Bonn-Cologne Cluster of Excellence ECONtribute, which is funded by the DFG, and the Kiel Institute for the World Economy, in cooperation with the local expert committees. Its aim is to increase price transparency in the real estate market. Different price indices for 20 cities and regions are freely accessible at www.greix.de (https://www.greix.de/). Additional cities will gradually be added to the data set.

Media Contact:
Mathias Rauck
Press Officer
T +49 431 8814-411
mathias.rauck@ifw-kiel.de

Kiel Institute for the World Economy
Kiellinie 66 | 24105 Kiel | Germany
T +49 431 8814-774
E medien@ifw-kiel.de
www.ifw-kiel.de

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Contact for scientific information:

Jonas Zdrzalek
Research Project GREIX –
German Real Estate Index
jonas.zdrzalek@ifw-kiel.de

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Price Development Market Segments

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Price Development Apartments

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Price Development of Apartments Peak to Bottom

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Criteria of this press release:
Business and commerce, Journalists, Scientists and scholars
Economics / business administration, Politics, Social studies
transregional, national
Transfer of Science or Research
English

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