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Building land prices the greatest factor in rising costs of housing development

Between 2011 and 2016, average building land prices for owner-occupied homes throughout Germany have risen by 27 percent from EUR 129 to EUR 164 per square metre. In major cities, the square-metre price for building land has increased by 33 percent – from slightly over EUR 250 in 2011 to almost EUR 350 in 2016.

Picture shows a viable site with a bridge on the left side and a wall on the right side and the ground floor at the rear. Building landSource: philipk76 /

That not only makes housing significantly more expensive, but also slows down the construction of affordable rented housing. The findings are the result of an analysis by the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR).

The analysis is based on purchasing price data for the last five years from the official Committees for Property Values (Gutachterausschüsse für Grundstückswerte). It shows that prices and rises in town and rural districts continue to fall behind those of major cities. However even there, they rose significantly higher than the general inflation rate. In town districts – often in the environs of major cities – purchasing prices for undeveloped properties increased from EUR 132 per square metre in 2011 to EUR 156 per square metre in 2016 (+19 percent), while in rural districts, the price of a square metre of building land rose from EUR 64 to EUR 78 in 2016 (+20 percent).

The average price of a property for owner-occupied housing development also increased significantly – by 27 percent to EUR 112,000 in 2016. In major cities, the average purchasing price of a property for owner-occupied housing development was almost EUR 200,000 (+25 percent). Average prices have experienced especially high price increases in expensive major cities. “Increasing property prices, especially in growth regions, have a decisive effect on purchasing and construction costs. That makes real estate more expensive,” the BBSR expert Matthias Waltersbacher stated. “High prices for building land on tight markets also drive up rents for new buildings to EUR 14-16 per square metre. That no longer allows privately financed housing development with affordable rents.”

While in town districts, the number of transactions for properties for owner-occupied development remained relatively stable between 2011 and 2016, the figure fell by 30 percent in major cities. The largest decreases were in expensive major cities such as Cologne, Frankfurt/Main and Stuttgart. Rural districts experienced an increase of almost 15 percent during the same period. “Property prices have risen so significantly in recent years that the economic exploitation pressure often prevents loose single-family home development,” Waltersbacher explained. “More and more buyers are seeking alternatives in surrounding areas.”

The analysis is based on research on independent towns, cities and rural districts for which transaction data on properties exist for an uninterrupted period since 2011, as recorded in the purchase price lists of the official Committees for Property Values. This representative longitudinal study comprises around a third of all towns, cities and rural districts in Germany. A comprehensive analysis of the property and real estate market for the years 2015 and 2016, entitled the “German Real Estate Market Report” (“Immobilienmarktbericht Deutschland”) will be presented in December 2017 by the Working Group of Higher Property Value Committees, Central Offices and Property Value Committees in the Federal Republic of Germany (Arbeitskreis der Oberen Gutachterausschüsse, Zentralen Geschäftsstellen und Gutachterausschüsse in der Bundesrepublik Deutschland, AK OGA).


Alexander Schürt
Division II 11 - General Housing and Property Markets
phone: +49 228 99401-2239