After the decline in real estate prices in Germany in 2023, they were able to recover slightly in 2024. According to an analysis by the Association of German Pfandbrief Banks (VDP), prices rose by 1.8 percent in the fourth quarter of 2024 compared to the same period the previous year. Compared to the previous quarter, the increase was 0.6 percent.
Real estate transaction data from over 700 credit institutions were evaluated for the entire German market for residential, office and retail properties. The main cause of the price increase in the fourth quarter of 2024 was the positive development of residential property prices, which increased by 2.1 percent compared to the end of 2023. The increase from the third to the fourth quarter of 2024 was 0.7 percent.
For the first time since mid-2022, office and retail property prices, which make up the commercial property market, also showed a positive trend, with a total increase of 0.5 percent compared to the same period the previous year. Compared to the previous quarter, the prices for commercial properties increased by 0.3 percent.
“The development of real estate prices in 2024 is again consistently positive, which solidifies the stabilization that had begun earlier” said VDP CEO Jens Tolckmitt. “Given the economic and geopolitical framework conditions, this is quite remarkable. However, a dynamic upward trend is still not in sight. In particular, the office and retail property market is still characterized by caution. There, the sideways movement continues.”
The 2.1 percent increase in residential property prices in Germany was mainly due to the positive development of prices for multi-family homes, which rose by 2.9 percent in the same period compared to the end of 2023. The price development of self-used housing, including single-family homes and condominiums, was slightly lower, at 1.2 percent. The growth rates for multi-family homes and self-used housing, which together made up the 0.7 percent increase in residential property prices from the third to the fourth quarter of 2024, were 1.1 percent and 0.3 percent, respectively.
Following the ongoing increase in the housing shortage in Germany, the result was not only the observed price increases, but also a renewed increase in the new rent agreements for multi-family homes of 4.6 percent on an annual basis and 1.0 percent on a quarterly basis. The yields on rental properties increased by 1.6 percent compared to the fourth quarter of 2023, which was the smallest yield increase since the third quarter of 2022.
In comparison to the entire federal territory, the prices of residential properties in the top 7 cities rose even more strongly in the fourth quarter of 2024: On average, residential objects in Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart increased in price by 2.3 percent compared to the end of 2023. Compared to the previous quarter, the price increase in the metropolises was an average of 0.9 percent. All top 7 cities showed price increases both on an annual and a quarterly basis. The growth rate was highest in Cologne at 3.8 percent, while it was only 0.3 percent in Stuttgart and 0.8 percent in Düsseldorf. The range of price increases in the metropolises from the third to the fourth quarter of 2024 was from 0.4 percent in Stuttgart to 1.4 percent in Cologne and Munich.
The new rent agreements for multi-family homes in the top 7 cities also developed positively, with an average increase of 3.9 percent. The lowest increase was seen in Cologne at 2.6 percent, while Stuttgart showed the strongest increase at 4.6 percent, followed by Berlin at 4.4 percent. The yield growth was an average of 1.4 percent compared to the previous year’s fourth quarter, with the individual developments being uneven: While the yield in Cologne fell by 1.5 percent, it increased in the other six metropolises, with the strongest increase in Stuttgart at 4.0 percent.
The slight increase in commercial property prices of 0.5 percent on an annual basis and 0.3 percent on a quarterly basis was mainly due to the office property prices, which rose by 0.7 percent between the end of 2023 and 2024. This was the first price increase in office properties since the third quarter of 2022. Compared to the previous quarter, the office property prices increased by 0.2 percent, only minimally upward. The retail property prices recorded a slight price decline of 0.2 percent in the fourth quarter of 2024 compared to the same period the previous year. Compared to the previous quarter, the prices for retail properties increased by 0.4 percent. Office and retail properties showed increases in both yields and new rent agreements in the fourth quarter of 2024: While the increase in office property rents was 2.7 percent, the increase in retail property rents was 3.0 percent, both compared to the fourth quarter of 2023. The positive yield developments were 2.0 percent for office properties and 3.2 percent for retail properties, according to the analysis by the Pfandbrief banks.