Trend: house prices up 5.15% y-o-y in Q3 2018

Germany’s housing market remains robust, with the average price of apartments rising by 5.15% during the year to Q3 2018, slightly lower from last year’s 5.54% growth. On a quarterly basis, house prices increased 2.16% in Q3 2018.

Analysis: Strong demand, low construction activity

Demand remains strong, buoyed by low interest rates, urbanization, and healthy household finances. Recently, the migration crisis and strong economic growth have added to the already strong demand in the country.

Despite this, construction activity remains weak. In 2017, dwelling permits dropped 7.3% y-o-y to 347,882 units, according to the Federal Statistical Office (Destatis). Though in the first nine months of 2018, dwelling permits increased slightly by 2.3% from a year earlier. Germany’s economic growth reached a six-year high of 2.2% in 2017, according to the European Commission.

Rents, rental yields: moderate yields at 2.9% to 3.7%

Berlin apartment costs are around €4,991per sq. m.

Germany: city centre apartment, buying price, monthly rent (120 sq. m.)
  Buying price Rate per month Yield
Berlin € 598,920 € 1,493 2.99%
Frankfurt € 544,680 € 1,678 3.70%
Munich € 942,360 € 2,243 2.86%

Recent news: Germany’s economy shrunk by 0.2% quarter-on-quarter in Q3 2018 – the first time it has contracted since Q1 2015, amidst weak private consumption and exports, coupled with strong imports. In fact German car production, a key component of the country’s export-related growth, plunged 24% in September 2018 from a year earlier. Despite this, the German economy is expected to expand by 1.7% this year, according to the European Commission.