Hedonic house price index January 2009, issued by Hypoport AG (DE)

In spite of the fact that a new year has begun, the performance of German house prices remains as it was for the time being. The total index weakened again slightly – and was dominated by declining prices for apartments and existing homes. By contrast, prices for new homes increased again slightly, albeit to a lesser extent than that witnessed over the past three months. The uncertainties surroundings expectations will continue to hamper the generally favourable factors influencing the demand for residential property until the initial economic policy measures start to take effect at the source.

As was already evident towards the end of last year, the price gap between existing property and new homes continued to widen in January. The price increases for new homes have remained low, in spite of rising construction prices, which clearly testifies to the ongoing uncertainty that potential buyers are facing.

There is currently no knowing how the ongoing and future economic policy measures will impact the economy/population in general, and the private real estate market in particular. Potential buyers will remain correspondingly reticent over the short term – and possibly even over the medium term. Even low levels of interest rates, the latest tax reductions, "Wohnriester" (subsidised savings scheme aimed at encouraging employees to buy their own homes) and the reintroduction of commuter tax relief will be unable to eliminate this cautious attitude immediately. Added to which, the increased need for renovations to comply with more stringent energy and environment protection laws will tend to push down the demand for existing homes and apartments. The trends demonstrated by the respective indices will therefore continue into February. Prices for new homes will, however, only increase slightly. As a result, the total index will continue to demonstrate a downward trend in the months to come.

The HPX indices in detail:

Declining: Total index

January 2009: 292.92
December 2008: 295.28
November 2008: 296.28

The price increase that is traditionally witnessed at the start of a year was noticeably absent this year. The level of the total index declined once more in January. Month-on-month, it weakened by 0.8%. As such, the index has dropped a total of 1.65 percentage points since September 2008, although at 292.92 it is still 1.22% above the level witnessed this time last year (January 2008: 289.65 points)..

Strongly declining: Prices for apartments ("apartments")

January 2009: 97.45
December 2008: 98.87
November 2008: 100.13

Prices for apartments also witnessed a renewed decline at the beginning of the year. At 97.45 points, the index has dropped slightly – by 0.01% - below the level witnessed this time last year for the first time in six months. Over the last three months, the index has declined by 3.35% in total; of this, the latest loss accounts for 1.44% by month-on-month comparison.

Slightly increasing: Prices for new single-family and two-family homes ("new homes")

January 2009: 104.46
December 2008: 104.34
November 2008: 103.38

The index for new single-family and two-family homes has increased slightly. The current level of 104.46 points represents a moderate increase of 0.12% compared with last month (December 2008: 104.34 points). As such, the index has increased by 1.63% in total over the last three months. Compared with its level of 100.49 points this time last year, the price index for new homes has therefore gained 3.95% in total over the past 12 months.

Declining: Prices for existing single-family and two-family homes ("existing homes")

January 2009: 91.01
December 2008: 92.07
November 2008: 92.77

As was also the case last month, the index for existing single-family and two-family homes posted another loss to its current level of 91.01 points, equivalent to a decline of 1.15% compared with the previous month (December 2008: 92.07). As such, the price index for existing homes has now dropped 0.76% below the level witness

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