German home prices tumble amid property rout

German home prices tumble amid property rout

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By Tom Sims and Rene Wagner

FRANKFURT (Reuters) -Residential property prices in Germany continued their fall, dropping 10.2% in the third quarter from a year earlier, a further grim sign for the nation’s real-estate sector, data on Friday showed.

It was the fourth consecutive quarter of declines and the biggest since Germany’s statistics office began keeping records in the year 2000.

The drop comes amid the biggest property crisis in decades in Germany, Europe’s largest economy.

“Until 2022, there was a speculative price bubble in Germany, one of the biggest in the last 50 years,” said Konstantin Kholodilin from the macroeconomics department of the German Institute for Economic Research (DIW).

“Prices have been falling ever since. The bubble has burst.”

For years, the property sector in Germany and elsewhere in Europe boomed as interest rates were low and demand strong.

But a sharp rise in rates and costs has put an end to the run, tipping developers into insolvency as bank financing dries up and deals freeze.

The decline for single and two-family homes in major cities was especially pronounced in the third quarter, dropping 12.7%, while apartment prices fell 9.1%.

(Reporting by Tom Sims and Rene WagnerEditing by Miranda Murray and Toby Chopra)

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