German Real Estate Prices Expected To Inch Higher

Germany posted its ninth consecutive month of year-over-year growth, largely due to government support, rising mortgages and economic growth. Analysts expect Germany to experience slower home price growth …

Germany posted its ninth consecutive month of year-over-year growth, largely due to government support, rising mortgages and economic growth. Analysts expect Germany to experience slower home price growth in the period ahead as the economy expands at a slower pace. See the following article from Global Property Guide for more on this.

Buoyed by strong economic and employment growth, house prices in Germany continue to rise in Q3 2010.  The over-all house price index for all property types increased by 2.3% y-o-y to September 2010. It was the ninth consecutive month of annual price increase, according to Hypoport AG, a leading financial services portal.

The mean price of houses and apartments were sharply up compared to a year earlier. The average price of existing homes was up by 4.5% y-o-y to €177,000 in September 2010. Over the same period, the average prices of apartments and new homes increased by 3.9% to reach €140,000 and €232,500, respectively.

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On a monthly basis, however, the price increases were showing a slightly bleaker future. The price increase for the overall index in September was lower compared to the past three months. The annual price increases were 2.85% in June, 3.5% in July and 4.7% in August.

The average price of existing homes in September 2010 was unchanged from last month and slightly down from €179,000 in July. While up from the previous month, the average price of apartments in September was lower compared to €141,000 in July. Property prices are expected to inch upward in the future or remain stable.

Germany’s residential real estate prices declined during the first half of 2009, before posting marginal gains at the second half. The continued accent of prices in the first half of 2010 was largely due to government support, rising mortgages and economic growth caused by the revival of exports.

After expanding by an average of 2.85% y-o-y during the first two quarters, the economy is forecasted to grow by 3% to 3.5% in 2010. This is in sharp contrast to the 4.9% contraction in 2009. For the first time since 1992, Germany’s unemployment dropped below 3 million in October 2010, according to the federal labor office. Unemployment rose sharply after reunification between East and West Germany and peaked at 5 million in 2005.

Economic expansion is expected to continue in 2011 but with a slower pace at 1.8% to 2%. The slower anticipated growth in 2011 is attributed to the slower growth in Germany’s major trading partners and the reduction in government spending. In line with EU’s major initiative to reduce budget deficits, Germany is set to cut the overall budget deficit to 3% in 2012 to comply with EU rules. The deficit is expected to be around 4% of GDP in 2010, up from 3% in 2009.

This article has been republished from Global Property Guide. You can also view this article at
Global Property Guide, an international real estate analysis site.

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