The German housing market is in high demand
Germany’s housing market continues to show resilience. In the second half of 2020, the country’s real estate market began a strong growth, which continues now. Low interest rates, financial incentives from the government, and the desire of the population to improve housing conditions have led to a sharp increase in demand for properties, and as a consequence, prices have risen. In 2021, the cost of homes and apartments rose by nearly 9.6%.
The real estate boom is also fueled by an intense economic recovery. In 2020 Germany experienced the worst recession in the country’s history, which was caused by a pandemic and a severe lockdown. House and apartment prices began to rise rapidly in the third quarter of 2020 with prices climbing by 12%, 11.4% in the fourth, and growth continued into 2021.
It should be noted that the German real estate market showed steady growth for 6 years. By comparison, properties have risen 67% since 2014. Demand continues to remain at a high level primarily due to the maintenance of low interest rates. In addition, the financial condition of households has significantly improved, and many citizens can now afford to buy their own homes. Some of the incentives for purchasing activity are the growth of economic indicators and migration trends.
The pandemic has put the housing segment on hold for a while, but once the restrictions were relaxed, activity picked up again. According to official statistics, the number of permits for new construction increased by 20% to 9,916 units. In 2020, there was a growth of only 2.2%.
The average cost per square meter in the German capital was 4990 euros. An apartment of 120 square meters in the center of Berlin can be purchased for 598,920 euros. The rental rate of such housing is 1,490 euros per month, based on which the yield of the object will be at 3% per annum.
In Frankfurt, a similar size apartment can be bought for about 544 680 euros, renting an apartment will cost you 1680 euros a month. That is the yield in this city is higher – about 3.7% per annum.
In Munich, such housing costs about 942,360 euros, and rents for about 2,240 euros per month, while the yield is about 2.9% per annum.
In 2021, the German government imposed a number of restrictions again to prevent the spread of the disease. As a result, economic growth declined by 1.7% in the first quarter. By the end of last year, however, GDP had grown by 3.4%.