House prices in Germany fell again in the second quarter of the year as high base interest rates weighed on the real estate market in Europe’s largest economy, Reuters wrote, based on the latest data published by Berlin’s Federal Bureau of Statistics.

House prices in Germany fell 9.9 percent from the same period last year, the biggest drop since Destatis, Germany’s federal statistics office, began collecting such data in 2000.

The decrease was 1.5% compared to the previous quarter and slightly more in less populated areas than in large metropolises.

In cities such as Berlin, Hamburg and Munich, apartment prices fell by 9.8%, and single-family homes and duplexes fell by 12.6%.

Data released last month by Destatis showed that building permits for apartment buildings in Germany fell by 27% in the first quarter of 2023 as the European Central Bank (ECB) repeatedly raised its key interest rate to fight inflation, which led to rising costs. in this sector. .

On September 14, the ECB decided on a new increase in the base interest rate, the tenth in a row, which raised the cost of credit to the highest level in the history of the institution that coordinates the central banks of the euro zone.

As a result of this decision, the interest rate paid by the ECB on deposits in commercial banks reached 4%, the highest level since the introduction of the euro in 1999. Just 14 months ago, the same interest rate was at a record low of minus 0.5%, which meant banks were paying to keep their cash at the ECB.

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Berlin’s central bank (Bundesbank) said in its monthly bulletin earlier this week that Germany’s economy is likely to contract again in the third quarter, with industry in recession and private consumption making a limited contribution to economic growth.

“Despite the slowdown in price growth, solid wage growth and good labor market conditions, private households continue to delay spending. In addition to consumer caution, the weaknesses of the industry affect economic indicators,” the Bundesbank noted.

German industry, which is heavily dependent on exports, has been hit particularly hard by weak demand from China, and prospects for a recovery remain dim, economists say.

Germany’s economy entered recession in early 2023 after a second straight quarter of contraction since late last year. Germany’s gross domestic product fell 0.3% in the first 3 months of the current year, after falling 0.5% in the fourth quarter of 2022.

Although the recession stopped in the second quarter of this year, the German economy has not been able to return to the positive, recording stagnation, or “zero” economic growth, as economists also call the situation.