# German residential property market faces risk of price drop – DIW study
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-23
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: German property market faces risk of price corrections: study
Meta Description: German property market faces risk of price drops of up to 10% for owner-occupied properties. Study suggests need for increased construction and public
URL: https://financedigest.com/german-residential-property-market-faces-risk-of-price-drop-diw-studyhtml

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BERLIN (Reuters) – The German residential property market faces a growing risk of price corrections, the DIW research institute said in a study released on Wednesday.

“We are not facing the bursting of a huge real estate price bubble in Germany,” the report’s co-author Konstantin Kholodilin said. “But price drops of up to 10% for owner-occupied flats and owner-occupied homes are quite possible.”

According to the study, prices for owner-occupied homes and flats in 97 [cities surveyed across the country](https://www.financedigest.com/buyers-shun-city-centres-for-country-villas-when-it-comes-to-lifestyle-investment-in-iberia.html "BUYERS SHUN CITY CENTRES FOR COUNTRY VILLAS WHEN IT COMES TO LIFESTYLE INVESTMENT IN IBERIA") have risen by an average of 11% this year, while rents have only increased by 4%.

Since [property purchases are refinanced by rental income – or in the case of owner-occupation by saved rent payments – property prices](https://www.financedigest.com/immediate-lift-of-oxford-property-prices-to-result-from-new-direct-high-speed-rail-connection-with-london.html "“Immediate lift” of Oxford property prices to result from new direct high speed rail connection with London") should develop in line with rents in the long term,” it said.

In many places, rising property [prices are due to high demand](https://www.financedigest.com/musk-says-tesla-price-cuts-triggered-demand-2023-sales-could-hit-2-million-vehicles.html "Musk says Tesla price cuts triggered demand, 2023 sales could hit 2 million vehicles") and low supply, the study added.

The population is growing in major German cities while too few new [homes are being built due to less favourable financing](https://www.financedigest.com/g20-watchdog-homes-in-on-decentralised-finance-after-ftx-crash.html "G20 watchdog homes in on decentralised finance after FTX crash") conditions, increased construction costs and, in many places, shortages of workers.

Politicians should quickly [give new construction activity a boost by speeding up procedures and increasing public](https://www.financedigest.com/japans-emperor-gives-first-public-new-years-greeting-since-2020.html "Japan’s emperor gives first public New Year’s greeting since 2020") investment in construction,” said co-author Malte Rieth.

(Reporting by Rene Wagner; Writing by Paul Carrel; Editing by Rashmi Aich)


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