German Home Prices Increased Most in 10 Years in Third Quarter

German home prices rose by the most in 10 years in the third quarter as more investors and individuals bought apartments amid low interest rates.

Prices for houses, apartments and residential buildings climbed 4.9 percent from a year earlier, according to an index published today by the VDP Association of German Pfandbrief Banks. That’s the biggest gain since at least the first quarter of 2003, when VDP began compiling data. The office-price index rose 6.9 percent, the most since the first quarter of 2012.

“The main reason for further increases in German home prices continues to be the high demand in thriving metropoles and major university towns,” Jens Tolckmitt, VDP’s general manager, said in the statement. “Since prices in top locations are already very high, investors are increasingly looking at medium-sized cities.”

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. Low interest rates have made buying property more affordable for individuals and companies.

Prices for owner-occupied apartments rose 3.8 percent and apartment buildings gained 6.1 percent in the third quarter compared to a year earlier, driven by a 5.2 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 and ING Groep NV. The data includes information from all cities in which members made loans.