Germany's house price rises continue to accelerate

House prices up 10.85% during the year to Q2 2020

Germany’s housing market remains strong, despite coronavirus-induced economic recession. The average price of apartments rose by a huge 10.85% during the year to Q2 2020, following y-o-y rises of 12% in Q1 2020, 11.15% in Q4 2019, 9.46% in Q3, and 8.21% in Q2. On a quarterly basis, house prices increased slightly by 0.39% in Q2 2020.

Strong demand, rising construction activity

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

In fact despite the pandemic, residential construction activity continues to rise. In the first six months of 2020, dwelling permits rose by 8.2% y-o-y to 157,103 units, following a 1% growth in 2019, according to the Federal Statistical Office (Destatis).

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.)

Recent news. The German economy plunged deeper into recession in Q2 2020, with real GDP shrinking by a whopping 10.1% from the previous quarter, following q-o-q declines of 2% in Q1 2020 and 0.1% in Q4 2019. It was the biggest quarterly drop since Germany started to publish quarterly GDP calculations in 1970. In an annual basis, the economy contracted by 11.7%. As such the German economy is projected to shrink by 6.3% this year, following a miniscule growth of 0.6% in 2019, based on figures from the European Commission.

Unemployment rate stood to 4.2% in Q2 2020, up from 3.8% in Q1 but still lower than the EU’s average jobless rate of 7.1%. This is equivalent to about 1,865,000 unemployed people in Germany.