German Commercial Property Prices Decline

FRANKFURT (Reuters) – German commercial property prices fell 5.4% in 2024, marking a fourth consecutive year of declines, yet some signs of stabilization were noted, according to the VDP banking association.

The decrease was less severe than the 10.2% drop in 2023, following a 0.5% increase in the fourth quarter of last year, which was the first quarterly rise since the first half of 2022.

For years, the European property market, especially in Germany, thrived amid declining interest rates, boosting demand. However, a sudden surge in interest rates and rising building costs led to insolvencies among some developers as bank financing dwindled and deals were stalled.

The market is showing gradual improvement as the European Central Bank lowers rates, but the VDP remains cautious about future prospects given the economy’s overall weakness.

“A reliable assessment of future price development is fraught with great uncertainty,” stated VDP Chief Executive Jens Tolckmitt.

Germany has faced the sharpest downturn in a real estate crisis that has also impacted China and the United States.