German commercial property prices drop 7.4%

German commercial property prices fell 7.4 per cent year-on-year in Q2 2024, marking a continuation of the decline that has plagued the market for two years, according to the VDP banking association.

Although there was a 0.4 per cent increase from Q1 2024, suggesting some stabilisation, the commercial property sector remains under severe strain.

Jens Tolckmitt, VDP’s chief executive, noted that market conditions are still tense. The drop in property values follows a period of boom driven by falling interest rates, which spurred high demand.

However, the recent surge in interest rates and rising building costs have led to financing difficulties and a slowdown in transactions, pushing some developers towards insolvency.

Germany’s property market crisis is the most severe in Europe and mirrors similar downturns in China and the United States.

Attribution: Reuters