Linkages Between Property Prices and Macroeconomic Determinants: Evidence from Germany

Abstract

The global financial and economic crisis has led to significant efforts to better integrate property price channels into macroeconomic models and to improve models. This paper deals with property prices in Germany and their determinants in the period Q1 2000‒Q4 2022. Since then, property prices in Germany have risen considerably. The models regularly use indicators that are aligned with the specificities of property, but less macroeconomic determinants. From economic models, theoretical modes of action between macroeconomic determinants and property prices are generally known. Regarding Germany, there are only limited studies on the direct influences of economic determinants. In the context of a regression analysis, this paper examines the relationship between the selected variables that directly drive house prices. On the one hand the results confirm a positive relationship between property prices and real GDP. On the other hand, a negative correlation was found for real short-term interest rates and inflation. In this study, no significant relationships were found between house prices and unemployment rate and long-term interest rates, despite a culture of long-term fixed interest rates in Germany.