Price slumps in the real estate market of up to ten percent possible

Berlin According to a study by the German Institute for Economic Research (DIW), the risk of severe price corrections on the real estate market is increasing. “We are not about to see a huge real estate price bubble bursting in Germany,” said DIW study author Konstantin Kholodilin on the study, which was available to the Reuters news agency on Wednesday.

“But price slumps of up to ten percent for condominiums and homes are quite possible.” Accordingly, the prices for homes and condominiums in the 97 cities surveyed have risen an average of eleven percent this year, while rents have only increased by four percent.

The DIW considers it alarming that purchase prices and rents are diverging in this way. “Since real estate purchases are refinanced through rental income – or in the case of owner-occupation through saved rental payments – real estate prices should develop in line with rents in the long term.”