Home & Living

Condominiums: Price Growth Continues but at Slower Pace

20.

September 2018

After years of brisk growth, both the number of condominiums sold in Germany’s major cities and the generated revenues suffered a modest decline in 2017. This is the upshot of the new ACCENTRO Homeownership Report that was presented on 17 September. It appears that the number of transactions went down by 5.62 percent compared to 2016, whereas the total revenues decreased by 1.32 percent. Although the ACCENTRO Homeownership Report had already shown flatlining transaction figures in 2016, the revenues kept going up that year. Nevertheless, selling prices continued to follow an upward trend, albeit at a less dynamic pace than in previous years. An average condominium in a major German city was 4.56 percent more expensive in 2017 than it had been the year before, whereas the one-year growth in 2016 was 7.73 percent. The sustained price growth demonstrates that, while the demand for condominiums remains strong, the supply shortage makes it more and more difficult for buyers to find product. This is nowhere more evident than in those of the Class A cities where the supply shortage is most pronounced, as the price trend here equals an above-average 6.78 percent.

New-Build Construction Taking Nose-Dive

The persistently short supply is moreover reflected in the sales figures of new-build flats. Having declined by 13.72 percent year on year, they dropped noticeably faster than the number of existing flats sold. New-build completions declined in five of Germany’s “Big Seven” cities, Düsseldorf and Berlin being the only ones with an upward trend. This altogether remarkable dip in transactions in the new-build segment cannot be explained by slowing demand. Property developers still have no problems to find buyers for their residential units in the major cities. The only plausible explanation for the steep decline is the lack of new-build flats on the market—and it should sound the alarm bells for the body politic. Despite the acute housing shortage in many major cities, it appears no way has been found yet to shape the parameters in housing construction in a way that would make it possible to meet pressing demand.

Housing Market Beginning to Level Out

The supply shortage is also having a negative impact on the dynamics of the housing market. This is particularly evident in the metropolises. Both in terms of revenues (-2.52 percent) and in regard to the number of sales (-8.71 percent), the rate of decline in the “Big Seven” cities has exceeded the national average. The stalled performance of the country's real estate hubs has serious ramifications for the German housing market as a whole because the seven Class A cities alone account for 58.01 percent of the revenues of all monitored cities combined. In sum, the findings of the ACCENTRO Homeownership Report illustrate that Germany’s housing market continues to show a very stable development even if it appears to begin levelling out now after a boom cycle of many years. This is safe to say with a view to the dropping sales and revenue figures on the one hand, and to the still positive but slowing price dynamics, on the other hand.

You can find the free download of the ACCENTRO Housing Cost Report here.

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