Property prices in Germany are expected to continue decelerating as the economy is slowing down. During the second quarter of this year the hedonic house price index fell by 2.65% compared to the previous quarter after showing a rise of 2.8% in the third quarter of 2011, of 2.7% in the fourth quarter, and of 3.9% during the first quarter of this year.
In June this year the average price of an apartment fell by 1.74%, while the average price of a new detached home dropped by 0.28%. However the average price of existing homes increased by 3.94%.
In the year ending June 2012, the overall house price index increased by 6.7%. The average price of an apartment was €149,700 in June, while the average price of a new detached home was €250,600, and the average price for existing homes was €192,950.
Over the last couple of years prices in Germany have increased modestly, with the house price index rising by 2.97% in 2010, and by 5.44% in 2011. The number of dwelling permits increased by 21.7% to reach 228,400 units in 2011, and completions rose by 14.6% to 183,000 units.
Last year the German economy expanded by 3%, after seeing GDP growth of 3.6% in 2010. However this year the IMF is predicting growth of just 0.6%, and the first-quarter of this year saw growth of just 0.5%. Last month Moody’s placed Germany on a negative sovereign credit outlook due to the burden the country faces in its efforts to keep the Eurozone together during the current debt crisis.
However rental yields are increasing and most Germans choose to live in rented accommodation rather than buy their own home. Around 55% choose to rent whereas owner occupation is currently somewhere around 42%.
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