Real estate markets

German housing market: The Housing Summit will not offer any tangible relief

The headline of the Federal Ministry of the Interior press release “Housing Summit 2018: Historically unique package of measures” creates great expectations. These will hardly be fulfilled by the measures resolved last Friday in the Federal Chancellery given the challenges in the housing market. The fact that prices and rents are soaring can be attributed above all to the insufficient supply of housing and demand remaining high. This will hardly be changed by additional billions, on the one hand, and further thumbscrews for landlords, on the other. The opposite is more the case, as the EUR 5 billion announced for social housing construction through 2021, the EUR 2.7 billion construction child benefits, special amortisation schemes and an upgraded housing construction premium will simply further stoke the demand for land for housing development and construction services. It is not a matter of a lack of money, as the discussion on the…

German housing market: another dynamic price increase in Q2 2018 but big cities lose momentum

Reports on the German housing market have meanwhile become almost boring, with prices rising at a fast pace on the back of good economic conditions, low interest rates and a shortage of supply. The second quarter of 2018 is nothing out of the ordinary either. The property price index just released by the Association of German Pfandbrief Banks (vdp) posted another sharp rise. Prices for residential properties rose by 7.5 percent year-on-year, while multi-family homes sought by investors were up by almost 10% annually. The increase has been even greater in the seven largest German cities. Residential property prices here climbed by nine percent while multi-family homes were another two percentage points higher. Very interesting developments can also be gleaned from the vdp figures. Whereas nationwide housing price growth maintained its rapid tempo, price momentum eased in the top-7 cities – Berlin, Dusseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart. Multi-family…

German housing market: prices continue to rise in Q1 2018 at a fast pace

How much longer can this go on? The already strong upward trend for prices in the housing market actually picked up speed in the first quarter. According to the price index just released by Verband deutscher Pfandbriefbanken, the prices for owner-occupied properties (detached houses and owner-occupied flats) rose 1.6 percent nationwide in Q1 2018. The increase for complete multi-family blocks in such demand among investors came to 2.6 percent. In other words, prices gained 7.4 percent and 10.9 percent respectively on the prior-year quarter. Both figures are record highs in the history of the index series, which reach back to 2003: The price hike for the year for owner-occupied houses topped seven percent for the first time. For multi-family blocks the annual growth rate entered double digits for the first time. In the seven largest German cities, prices rose even faster. On an annualised basis, the price of owner-occupied housing…

German housing market: Baukindergeld to promote home ownership for families

With Germany’s citizens finding it increasingly difficult to pay the sharp increase in rent and purchase prices, particularly in the growing big cities, housing has become a political issue. The high prices are putting a strain in particular on families that are keen to buy in order to secure the living space needed for their offspring. A 120 m² privately-owned new apartment, including ancillary costs such as land transfer tax and notary fees, costs around EUR 500,000 in a metropolis. This figure rises to as much as EUR 750,000 in the seven big German cities and is considerably higher again in good locations or expensive cities such as Freiburg or Munich. In their coalition agreement, the three ruling parties that are in power since mid-March – CDU, CSU and SPD – agreed on various measures to make living more affordable again. One of these measures is the Baukindergeld which has…

German housing market: Germany’s Federal Constitutional Court grants a final grace period for land tax

That hurts: Germany’s Federal Constitutional Court this week quashed the legal basis of the EUR 14 billion land tax. Accounting for around one sixth of municipal tax revenue for many local authorities, this tax is a welcome source of funds that the municipalities can also increase by means of a rate of assessment. The tax revenue is also very stable, as it is practically immune from economic influences. Speed is of the essence to maintain the status quo. According to the court’s ruling, the system must be reformed by the end of 2019 with an implementation period up to 2024. But how did it get this far? The land tax itself is not unconstitutional, but rather its totally outdated basis for assessment, which is based on valuations from 1935 for East Germany and 1964 for West Germany. Land price development has varied completely by region in the last few decades,…

International housing markets: curbs on lending and rising mortgage costs dampening rise in prices

There was a further increase in prices in most international property markets in 2017 − indeed a sharp one in many cases. Looking at individual countries, the overall picture has even improved further since there were hardly any countries left with falling prices to offset countries with strong price rises, and even where prices did fall, the decline was only just below the zero line. In addition, the pace of price increases, e.g. in Ireland, the Netherlands and Portugal, picked up further. Germany also saw another sharp annual increase of 6 per cent. However, encouraging though the prospect of a market recovery in Greece or Italy may be, this is far outweighed by concerns surrounding the ongoing boom in countries with a strong economy and high immigration rate such as Australia, Canada, New Zealand, Norway and Sweden. Already lively demand for property is being fuelled further by low interest rates…

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