Germany witnessed a decrease of 5.4% in commercial real estate prices during the year 2024, which is the fourth year in a row from the decline in this sector, according to a report issued by the German Banking Association (VDP).
Despite this decrease, the data showed some stability signals with a slight increase of 0.5% in prices during the fourth quarter of last year, which is the first quarterly increase since the first half of 2022.
The crisis and its effects
The real estate market in Germany, after it was prosperous throughout the years thanks to the low interest rates and the increase in demand, has suffered from a severe crisis as a result of the sudden rise in interest rates and construction costs.
These factors prompted some real estate developers to bankruptcy due to the limitation of bank financing and the freezing of deals, according to Reuters.
Germany is the most affected country in Europe than this crisis, which has also affected other real estate markets in both China and the United States.
Unstable circumstances
Although the market has started to show a slight improvement, as the European Central Bank has reduced interest rates recently, future expectations are still mysterious.
“The reliable evaluation of the development of prices in the future is greatly fraught with uncertainty.”
The last years were distinguished by the prosperity of the European real estate market, especially German, as it has benefited from the low benefits that motivated investment and demand. However, the sudden shift in monetary policies and high construction costs created major challenges, prompting the real estate sector in Germany to face its worst crisis in decades.
