Rising interest rates and rising material costs cause the most severe quarterly decline since 2000, hurting the German housing market

House prices in Germany experienced their most severe decline in the third quarter of 2023 since data began to be published in 2000, according to data from the Federal Statistical Office (Destatis). The impact of higher interest rates and rising material costs is being felt across the housing market, with notable declines particularly in the big cities.

According to data released on Friday, residential property prices saw an annual decline of 10.2% between July and September 2023, marked by the fourth consecutive quarter of decline. Large cities were hit hard, with a 9.1% decline in apartment prices and a significant 12.7% drop in single and two-family home prices, according to hotnews.ro.

The German housing market, fuelled by a decade of low interest rates, is now facing its worst crisis in decades, and signs of instability are increasing as some property developers enter insolvency. Austrian real estate giant Signa, with a significant presence in Germany, filed for insolvency last month, triggering the biggest collapse yet in the region's property market.

Economists warn that the decline in prices signals the bursting of an alleged speculative bubble that characterized the German property market until 2022. This sudden change underscores the need for adjustments in investment strategies and future planning within the real estate sector.