BERLIN, Dec. 22 (Xinhua) -- In the third quarter of 2023, residential real estate prices in Germany fell by an average of 10.2 percent compared to the same period last year, the steepest drop since data collection began in 2000, the Federal Statistical Office (Destatis) said on Friday.

The biggest drops were seen in the country's top seven metropolitan areas (Berlin, Hamburg, Munich, Cologne, Frankfurt am Main, Stuttgart, and Dusseldorf). There, prices for one and two-family houses fell by 12.7 percent, while prices for apartments were down 9.1 percent.

Falling demand due to high interest rates and financing costs had already depressed prices in the first half of the year. In the first and second quarters, residential real estate prices fell by 6.8 percent and 9.6 percent, respectively.

"There was a speculative price bubble in Germany until 2022, one of the biggest in the last 50 years," Konstantin A. Kholodilin from the German Institute for Economic Research said on Wednesday. Since then, prices have been falling and the bubble has now "burst."

Germany's construction and real estate industry has entered crisis mode. According to insurance group Allianz, insolvencies in the sector rose by 20 percent year-on-year in the first eight months.

"Affordable housing has been in short supply for years, and the current situation is likely to exacerbate this even further," Milo Bogaerts, chief executive officer of Allianz Trade in Germany, Austria and Switzerland, said, adding that there is already a shortage of 700,000 houses this year.

Almost half of residential construction companies in Germany are reporting a lack of orders, with the trend rising, according to the ifo Institute for Economic Research. High costs and current interest rate levels are "causing many builders to despair," ifo expert Klaus Wohlrabe commented earlier this month.

After interest rates for ten-year building loans in Germany reached their highest level of the last decade at 4.2 percent in November, they weakened slightly to 3.8 percent at the beginning of December, according to mortgage broker Interhyp.

Construction prices for residential buildings meanwhile rose by 6.4 percent year-on-year in August, according to Destatis. Prices for most building materials continued to be significantly higher in the first six months than last year.

The German government expects to miss its construction target of 400,000 new apartments this year and next by around 130,000 units each. By the end of 2024 or early 2025, the housing market would "brighten up," Minister of Construction Klara Geywitz told the Rheinische Post newspaper on Thursday. Enditem

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