“The real estate boom is slowly coming to an end”

The harsher global economic climate is having an impact on the German real estate market. This is what the Association of German Pfandbrief Banks says and is making a forecast.

The real estate boom in Germany should slowly come to an end.

In Germany, demand on the real estate market is likely to decline. “The exciting question is how long this nine-year increase in prices will continue and whether it will end abruptly or slowly expire,” said a report by the association on the development of the German real estate market last year. “If you take the development of the past quarters as a benchmark, the latter currently seems to be more the case.”

According to the association’s calculations, real estate prices rose by an average of 8 percent last year, but the rate of growth slowed over the course of the year. While prices rose by 8.8 percent in the first quarter of 2018, the increase in the fourth quarter was only 7.6 percent.

This is primarily due to a slowdown in the rise in the price of commercial real estate, for which the association cites “the increasingly harsh global economic climate and the associated declining demand for exports” as the cause. “On the other hand, the continued high demand for labor is causing wages to rise,” observes the association, which, together with the low interest rates, cites this as an important reason for the continued strong rise in residential property prices. Here prices rose by 8.3 percent last year.