vdp property price index: Property prices up by 6 % in 2020 despite pandemic
Berlin, February 10, 2021
vdp index reaches new record high of 172.8 points
The property price index published by the Association of German Pfandbrief Banks (vdp) reached a new record high of 172.8 points at the end of 2020 (base year 2010 = 100 points). An evaluation of transaction data from 2020 for the German market as a whole shows that, compared with the end of 2019, property prices rose by 6.0 % last year overall. Unlike other indices, the vdp index is based on real data from property transactions carried out by more than 700 banks.
“The gap between the trend in residential and commercial property prices is growing steadily wider.” Jens Tolckmitt
“The property market in Germany remains highly resilient to the effects of the Covid 19 crisis. At 6.0 %, the increase in property prices in the pandemic year 2020 even came close to the level of 2019, when growth of 6.3 % was recorded,” said Jens Tolckmitt, vdp’s Chief Executive.
Whereas prices for residential properties rose by 7.5 % last year, commercial property prices went up only marginally, by 0.6 %.
“The gap between the trend in residential and commercial property prices is growing steadily wider. The measures taken to contain the Covid 19 pandemic, such as the renewed lockdown, are having an increasingly negative impact on commercial real estate, particularly in the case of properties that have had to remain closed for months now. By contrast, the persistently high demand for residential properties continues to fuel price growth,” Tolckmitt added.
Overview of change in prices from Q4 2019 to Q4 2020:
Residential/commercial property prices overall: +6.0 %
Residential properties in Germany: +7.5 %
Residential properties in the top 7 cities: +4.7 %
Commercial properties: +0.6 %
- Office properties: +1.7 %
- Retail properties: - 2.0 %
Price growth for residential properties remained strong in 2020
Shrugging off the Covid 19 crisis, residential property prices continued to rise throughout 2020. The nationwide growth rate of 7.5 % in 2020 was driven somewhat more strongly by year-on-year increases in owner-occupied housing (with prices up by 8.5 %) than in multi-family houses (+6.8 %). The rise in new lease rentals decelerated over the course of last year. Whereas growth stood at 3.9 % in the first quarter of 2020, the increase in new lease rentals stood at 2.8 % at the end of last year.
Top 7 cities: Unabated increase in residential property prices
Residential property prices in Germany‘s top 7 cities likewise continued on their upward trajectory, albeit it at a slower pace than for the country as a whole. Prices in the major cities (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart) rose on average by 4.7 % in 2020.
Price momentum in the case of multi-family houses in the top 7 cities (+4.5 %) came closer to the growth recorded for owner-occupied housing (+5.7 %) than in the previous quarter (3.5 % and 5.2 % respectively). The 1.7 % increase in new lease rentals at the end of 2020 was at a level similar to that of previous quarters.
Prices of commercial properties in decline since the pandemic began
In contrast to residential properties, prices of commercial properties were up by only 0.6 % in 2020. The corresponding growth rate one year before was ten times higher, at 6.0 %. That said, office premises saw a considerably more favorable trend (+1.7 %) over the year than the retail premises segment, where prices actually fell by 2.0 % in 2020. However, the years-long upsurge in office property prices, too, has come to a halt in the meantime. The data since the pandemic began (April to December 2020) show a drop in office property price growth by 0.3 %. The decline in retail property prices slowed down in the last quarter, with prices moving sideways since then.