Real house prices were down 11.78% during 2022
The signs of a continuing housing market slowdown in Germany are becoming more evident, as higher mortgage interest rates and rising inflationary pressures have compounded affordability constraints. The average price of apartments fell by a huge 11.78% (inflation-adjusted) during 2022, in stark contrast to the previous year’s 7.68% growth and its worst showing in recent history. On a quarterly basis, real house prices declined 5.89% in Q4 2022.
Until last year, Germany’s housing market has been growing continuously since 2014, with house prices up by more than 70% from Q1 2014. Years of very low interest rates have made it easy for households to move to larger, more expensive homes and for first-time buyers to get into the property ladder.
Demand falling, residential construction weakening
Demand is now softening, amidst rising interest rates and construction costs, coupled with decreasing purchasing power caused by soaring inflation. This has led to a halt of several residential construction developments.
Residential construction activity is also slowing. In the first eleven months of 2022, dwelling permits fell by 5.7% y-o-y to 321,757 units, following annual growth of 3.4% in 2021 and 2.2% in 2020, according to the Federal Statistical Office (Destatis).
Rents, rental yields: moderate yields at 2.78% to 3.37%
Germany: city centre apartment, buying price, monthly rent (2-BR apartments)
| Buying price | Rate per month | Yield | |
| Berlin | € 384,000 - €649,000 | €755 - €2,000 | 2.84% |
| Frankfurt | € 286,500 - €799,000 | €900 - €1,500 | 3.37% |
| Munich | € 559,000 - €789,000 | €1,255 - €1,695 | 2.78% |
| Stuttgart | € 385,000 - €389,500 | €1,220 - €1,531 | 3.81% |
| Hamburg | € 300,000 - €770,000 | €822 - €1,170 | 2.83% |
| Leipzig | € 279,500 - €379,000 | €700 - €885 | 3.18% |
| Cologne | € 399,500 - €530,000 | €1,090 - €1,270 | 3.04% |
| Düsseldorf | € 423,000 - €594,000 | €1,110 - €1,250 | 3.09% |
Recent news: Germany’s economy grew by 1.8% in 2022 from a year earlier, in Q3 2022 from a year earlier, supported by an increase in demand following the post-pandemic reopening of the economy. Yet it was a slowdown from year-on-year expansion of 2.6% in 2021.
The German economy is expected to suffer another mild contraction in early-2023, amidst the continuous increase in energy prices for households and the slowdown in export growth due to weak foreign demand. As a result, the European Commission expects Europe’s biggest economy to grow by a miniscule 0.2% this year.
