Even after 10 years of boom, prices are continuing to rise in the German housing market. Despite dire warnings of a volatile housing bubble that is liable to burst, the trend seems to be continuing unabated. 

Real estate prices rose rapidly in third quarter of 2019

Apartments and houses in Germany continue to become more expensive, even after 10 years of real estate boom. As an evaluation by the Hamburg Institute for Urban, Regional and Housing Research (Gewos) shows, in the third quarter of 2019, the price increases continued unchecked. Meanwhile, experts expect additional markups in the coming year. 

According to the latest Gewos data, the price of condominiums rose by 8,2 percent compared to the third quarter of 2018, to an average of 2.030 euros per square metre. This is the third year in a row that the increase has been so strong. In Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Düsseldorf, asking prices even grew by as much as 9,0 percent.

Prices for houses also continued to rise rapidly - by 7,4 percent in the third quarter to 2.670 euros per square metre, on average. In the seven largest German cities, homes now cost an average of 6.100 euros per square metre, more than twice the German average. In eastern federal states, you can pay as little as 1.500 euros per square metre.

House prices rising much faster than rents

The data also shows that the gap between rentals and house purchases is widening - the prices for new rental contracts grew, on average, by 3,7 percent in the third quarter of 2019. Real estate prices have been rising much faster for years, as low interest rates, favourable mortgages and a strong economy have encouraged the rush for real estate to continue unabated. 

Overall, the price of real estate in Germany increased by almost 50 percent between 2008 and 2018, according to the latest data from the Federal Statistical Office (Destatis). Far from slowing down, the boom has actually accelerated since 2015 and is even spreading to more sparsely-populated states. 

At the same time, Germany’s desperate housing shortage continues. According to the construction industry, just 300.000 new apartments were built in Germany in 2019, short of the 375.000 the coalition was aiming for. While 693.000 new apartments were approved in 2018, construction companies are unable to keep up with the flood of orders. “Germany is in a traffic jam,” said Georg Thiel, president of Destatis. 

No end to price increases in sight

Back in the 1990s, more than 600.000 apartments were built in Germany each year - and average prices hardly rose. Over the years, the number gradually reduced until the low point of the 2009 financial crisis.

While property cycles in the past have generally ended in recession, the German economy looks to be robust. Housing experts don’t believe a collapse in property prices is on the cards. 

On the contrary, low interest rates and an oversupply in many parts of the country mean that, overall, housing remains affordable. As long as this remains the case, prices can continue to skyrocket in the cities.