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German Second-Quarter Property Prices Climb Most in a Year

German property prices rose by the most in a year in the second quarter as more residents bought homes and office investment increased amid tight supply.

Prices for houses, apartments and residential buildings climbed 4.1 percent from a year earlier, according to an index published by the VDP Association of German Pfandbrief Banks today. The office-price index rose 5.6 percent, giving both measures their best gain since the second quarter of 2012.

“Price developments in German residential property are still being determined by large cities and university towns,” Jens Tolckmitt, VDP’s general manager, said in a statement. “Rising populations and a growing number of households there are leading to continuous demand.”

Housing demand in cities such as Berlin and Frankfurt is outpacing construction as young workers move to areas where jobs are easier to find. Office prices are being pushed higher by institutions seeking a safe investment as the euro area went through a record-long recession that only ended in the last quarter.

Commercial-property investments in Germany, Europe’s largest economy, reached 12.5 billion euros ($16.6 billion) in the first half, the most since 2008, according to data compiled by London-based broker Savills Plc. (SVS)

Prices for owner-occupied apartments rose 6 percent and residential-building prices gained 4.9 percent, driven by a 4.6 percent increase in rents paid on new leases, VDP said.

VDP collects price data from mortgage contracts signed across Germany by its 38 member banks, which include Deutsche Bank AG, Commerzbank AG, Banco Santander SA (SAN) and ING Groep NV. (INGA) The data includes information from all cities, regardless of their size, in which members made loans. By comparison, other German property indexes are based on prices and rents in only the largest cities.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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