The German real estate market is facing ongoing challenges, both in the short and long term. Factors such as rising interest rates, economic fragility, and consumer adversity contribute to the current crisis. Additionally, a looming demographic downturn further exacerbates the situation, suggesting a prolonged period of decline in real estate prices across Central Europe.

The latest data from the Association of German Pfandbrief Banks (VDP) reveals a persistent downward trajectory in real estate prices. The VDP's real estate price index dropped to 174.7 points in the first quarter, marking a 5.3 percent decrease compared to the previous year and a 0.3 percent decline from the preceding quarter. Since its peak in the second quarter of 2022, prices have plummeted by 10.3 percent, according to the association's findings.

Residential property prices experienced a 4.3 percent decline in the first quarter of this year compared to the same period last year. Meanwhile, commercial property prices saw an even steeper decline, with a 9.6 percent drop year-on-year.

This persistent downturn not only impacts property owners but also exerts pressure on banks and lenders, as declining asset values affect their balance sheets. Looking ahead, analysts predict continued challenges for the German real estate market.