The fall in house prices in Germany continues. The Association of German Pfandbrief Banks (VDP) reported its figures for the fourth quarter of 2023 on Monday: According to this, real estate prices fell by an average of 7.2 percent over the year. This meant another decline of 2.2 percent compared to the previous quarter. Compared to the peak in spring 2022, this was a price drop of 10 percent.

Christian Siedenbiedel

Editor in business.

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    “A turnaround in real estate prices, which is often the subject of public speculation, is not yet foreseeable,” said association managing director Jens Tolckmitt. Both residential and commercial properties continued to fall in price. Over the year, the price decline for residential properties was 6.3 percent in Munich, 6.1 percent in Frankfurt, 5.3 percent in Stuttgart, 5.2 percent in Hamburg and 5.1 percent in Berlin.

    Before the price collapse, however, there had been an exceptionally strong price increase in the big cities and their surrounding areas during the years of zero and low interest rates. Real estate price development has long been more difficult in more remote regions and those with a declining population. Postbank's residential atlas, which reports in detail every year on the changes in real estate prices in 401 German districts and independent cities, showed falling real estate prices for districts such as Altenburger Land in Thuringia in 2018, when things were still rising steeply almost everywhere else. But there are also structurally weak regions in the west where no one is surprised by falling real estate prices, for example in the very east of Bavaria.

    Many homeowners who are thinking about selling are probably worried about how far down the market can go. Both Commerzbank and the Deutsche Bundesbank recently said that a little could be done after their investigations into the exaggerations in the real estate market. In attractive locations there is certainly no need for homeowners to worry too much; Where houses are in high demand, prices will rise again at some point. But of course there are also difficult situations and difficult objects. In an extreme case, could house prices for unfavorable properties fall to zero in some regions?

    Sometimes demolition costs play a role in the price

    A FAZ survey of around 30 real estate agents in Germany shows: The case of a house price falling to zero is extremely rare - but it cannot be ruled out. In economics, physiocrats like Jacques Turgot had already assumed an always positive value for land in the 18th century, which was derived from the future returns of these, so to speak, eternal possessions. This is usually the case in practice. Occasionally, however, there are also cases in which a dilapidated house has to be demolished - and the expected costs exceed the value of the property.