Germany’s housing sector is strengthening at a solid pace

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In the third quarter of 2021, home prices in the country rose 2.25 percent quarterly and 8.25 percent year-over-year.

Germany’s housing market remains vibrant amid improving economic conditions. According to Global Property Guide, an analytical portal, the average price of apartments in the country rose 8.25 percent year-over-year in the third quarter. Recall that annualized growth was 8.38% in the second quarter, 7.95% in the first quarter, 8.8% in the fourth quarter of 2020, and 7.38% in the third quarter of 2020. For the third quarter, residential real estate in Germany went up 2.25%.

Context. The real estate market in Germany has been growing steadily for the past six years. At the same time housing prices have risen by more than 70% compared to the first quarter of 2014.

Demand and construction. Demand has remained strong, helped by low interest rates, urbanization, and good household finances. In recent years, the migration crisis and strong economic growth have increased already high buying activity.

Despite the pandemic, housing activity continues to rise. According to the Federal Statistical Office (Destatis), housing permits increased 4.8 percent year-over-year to 282,420 units in the first three quarters of 2021 after a 2.2 percent annual increase in 2020.

Oldypak lp
Oldypak lp

Prices and yields. Apartments in Berlin cost an average of €4,990 per square meter. Apartments of 120 square meters in the city center can be purchased here for about € 598,920 and rented for € 1,490 per month. Thus, the average yield is 2.99% per annum. In Frankfurt am Main the similar object will cost €544,680, you can earn on average €1,680 per month on rent, the annual yield reaches 3.70%. And in Munich, for an apartment with similar features will have to pay €942,360. To rent it out will be possible for €2 240 per month, thus earning 2.86% per annum.

Economy. German GDP grew 10% in the second quarter and 2.5% year on year in the third quarter after five consecutive quarters of year-on-year decline. The rebound was driven by growth in household consumption and government spending. Europe’s largest economy strengthened by 1.7% in quarterly terms. The European Commission expects German GDP to rise 2.7% this year after a 4.6% decline in 2020.

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