There are big changes on the German property market, according to research by the Kiel Institute for the World Economy (IfW).
The IfW found that property prices rose in the months from April to June this year - after two years of declining prices.
Compared to the first quarter of the year, prices for condominiums rose by 2.4 percent in the second quarter. Single-family homes cost two percent more. Meanwhile, prices for multi-family homes rose by 4.4 percent. Prices had fallen in the previous quarter.
The figures are based on the German Real Estate Price Index (GREIX) property price index, which contains data from 19 cities. The index is based on the purchase price collection of local expert committees.
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There were signs in previous months that the property market was beginning to see changes - now this study seems to confirm the turnaround.
"The trend reversal on the property market has begun," said IfW property expert Jonas Zdrzalek. "The great uncertainty of the past few years and months is clearly subsiding and the outlook for falling interest rates is stabilising the market.
"Investors appear to be regaining confidence in the long-term value appreciation of property. Added to this is the slump in new construction, which is tightening supply and thus supporting price momentum," Zdrzalek said.
Even adjusted for inflation, i.e. measured in current purchasing power, real estate has increased in value for the first time in two years, said the IfW.
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Rising prices in Hamburg, falling prices in Cologne
Among Germany's seven most populous cities, prices for owner-occupied flats rose the most compared to the previous quarter in Hamburg (by 4.3 percent), Frankfurt (3.7 percent) and Düsseldorf (2.2 percent).
In Stuttgart, flats became 0.6 percent more expensive. In Cologne, however, prices fell by 0.4 percent. The researchers pointed out that prices had already gone up slightly in Cologne in the first quarter of 2024.
There is also a striking trend emerging in Germany's medium-sized cities. In Münster, for instance, a significant increase of 5.6 percent on house prices was recorded in the second quarter. Prices had already risen by over four percent in the 1st quarter of 2024. It means condos have now become around 10 percent more expensive in the first half of 2024.
There was no data available for Munich and Berlin.Â
If the trend reversal continues, the Kiel-based economic researchers believe it is possible that the large-scale price correction on the property market is coming to an end after around two years. A correction is usually understood to be a downward movement in an index, for instance, which corrects excessive values.
According to the IfW, the GREIX price index recorded a price decline of around 14 percent in around two years. The correction was strongest in Stuttgart where prices have fallen by more than 20 percent.
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"The GREIX data suggests that the property sector is regaining momentum and that the market has decided on a direction after volatile months," said Zdrzalek.
"If the price turnaround is confirmed, the correction phase would only have been the interruption of a long-lasting upward trend."
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