Residential property prices in Germany declined at a record pace in 2023.

In 2023, residential property prices in Germany showed a record drop over the past 60 years, due to increased financial costs and the political situation, which alienated potential home buyers.

While prices for apartments and private homes fell by 9% and 11%, respectively, the value of multi-family homes decreased by 20% compared to last year, according to the German real estate index published by the Kiel Institute for World Economics.

The decrease in prices for investment property indicates that large buyers in the past year have become less risk-averse and are ready to purchase housing only with significant discounts.

For first-time buyers, the expiration of government subsidies has been added to the financial difficulties associated with rising mortgage rates. Stricter energy efficiency regulations and rising material prices have further cooled demand for existing housing, making it difficult to estimate the costs of future repairs.

Last year’s price decline followed an equally unprecedented rise in real estate prices after the financial crisis of 2009. Growth then accelerated during the Covid-19 pandemic, and prices peaked in early 2022.

However, the figures for the fourth quarter indicate that the decline may soon stop. Moreover, in the last quarter of 2023, prices for multi-family homes increased by 5%, which suggests a return of investor interest in German residential real estate.

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