German commercial real estate prices declined by 5.4% in 2024, marking the fourth consecutive annual drop, the banking industry association VDP reported on Monday. The decline is less steep than the 10.2% drop recorded in 2023, with prices rising 0.5% in the fourth quarter, their first three-month increase since the first half of 2022.
The German property sector is struggling to overcome its worst crisis in decades. For years, real estate in Europe, particularly in Germany, experienced significant growth as interest rates fell, boosting demand. However, a sudden rise in interest rates and construction costs has led some developers into insolvency as bank financing dried up and transactions froze.
The market is gradually improving as the European Central Bank reduces interest rates, but the VDP remains cautious about the outlook, given the weak economy. "A reliable assessment of the future price development is burdened with great uncertainty," said VDP head Jens Tolckmitt.
Germany is the European country hardest hit by the real estate crisis, which has also affected China and the United States.