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Price Upswing Slows Down - Increased Activity in the Property Market
"After the historic drop in prices in 2023, prices are moving sideways in the fourth quarter of 2024,” says Jonas Zdrzalek, real estate expert at the Kiel Institute. "One reason could be the ongoing high financing interest rates.”
The price upswing that began in the second quarter of 2024 slowed down recently, particularly for apartments. Compared to the third quarter of 2024, apartment prices fell slightly by 0.1% in Q4 2024.
Prices for single-family homes rose by 1.8%, continuing the moderate price upswing of the previous quarter. Prices for multi-family homes rose by 5.4% in the fourth quarter of 2024. However, there is a high degree of volatility in this segment due to the low number of transactions, and thus the informational value is limited.
Compared to Q4 2023, sales prices for apartments and single-family homes increased in Q4 2024. At the end of 2024, however, it is clear how much the downturn from the crisis years of 2022 and 2023 continues to have an impact. Prices for apartments in the fourth quarter of 2024 are still 13% below their respective peak in 2022 - adjusted for inflation, i.e. measured in current purchasing power, the decline is even 21 percent. Single-family homes also cost 13 percent less than at their peak (down 23 percent when adjusted for inflation). The decline was even more drastic for multi-family homes: sales prices here are 25 percent below their peak, or even 33 percent when adjusted for inflation.
Significantly more transactions than in the crisis year 2023
Following a sharp decline in transactions in 2023, the number of transactions increased again in 2024. Compared to the previous year, 26% more apartments, 23% more single-family homes, and 24% more multi-family homes were sold.
Despite these developments, market activity on the real estate market is still far below the historical peak. In 2024, almost a third (-32%) fewer apartments were traded, a quarter (-25%) fewer single-family homes and a fifth (-20%) fewer multi-family homes than in the record year of 2021.
“Liquidity on the real estate market is slowly increasing again, which could indicate that the uncertainty among market participants is easing,” says real estate expert Jonas Zdrzalek, ”but there is still no sign of the next boom.”
Different dynamics in major German cities
Apartment prices are developing differently across Germany. This is shown by a look at the last quarter of 2024 in major German cities (Berlin, Dresden, Frankfurt/Main, Hamburg, Leipzig, Munich, Stuttgart). In Dresden, prices rose sharply by 4.4 percent compared to the previous quarter - while on the other hand the city has the lowest average price per square meter among major German cities at EUR 3,400. In Frankfurt (with an average price per square meter of EUR 5,900), there was a moderate price decline of 1.6 percent compared to the previous quarter. Munich has the highest price per square meter in the GREIX at EUR 8,600 (as of Q3 2024).
Other cities recorded only minimal movements in real estate prices: Leipzig (+0.6 percent) and Stuttgart (+0.2 percent) saw slight increases, while Hamburg (-0.2 percent) and Berlin (-0.3 percent) saw slight decreases.
Outside the major cities, this mixed picture continues. In most of the cities included in GREIX, prices remained stable with minimal fluctuations. By contrast, prices for apartments in Wiesbaden, for example, fell by 2.5 percent, while prices in Karlsruhe fell by 1.9 percent. Potsdam, on the other hand, reported a price increase of 0.8%.
Note: No data for the fourth quarter of 2024 is available for Munich in this GREIX update.
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Methodological note
The Greix is a price index based on a hedonic regression method. This method mitigates price distortions that often arise when using average price per square meter. For instance, if a high number of large apartments in a prime location are sold in a given year, this can inflate average prices per square meter. However, such fluctuations may not reflect a general increase in real estate values. Using hedonic regression methods, specific property characteristics do not cause upward or downward distortions in the price trend.
About the Greix:
- What is the Greix?
The Greix is a real estate price index for Germany based on the sales price collection of the local expert committees, which contains notarized sales prices. It tracks the price development of individual cities and neighborhoods back to 1960 and is based on more than two million transaction data. The dataset can be used to analyze long-term trends in the real estate markets and to place current developments in a historical context.
- What data and methods are used to create the indices?
The data collection and evaluation take place in cooperation with the local expert committees. All real estate transactions are recorded in full. The price development is calculated according to the latest scientific standards and statistical methods (hedonic regression method). The Greix thus stands for the highest scientific data quality.
- Who is funding the Greix?
Greix is financed by public funding and is a project of the Bonn-Cologne Cluster of Excellence ECONtribute, which is funded by the DFG, and the Kiel Institute for the World Economy, in cooperation with the local expert committees. Its aim is to increase price transparency in the real estate market. Different price indices for 18 cities are freely accessible at www.greix.de. Additional cities will gradually be added to the data set.
