German property prices rose by the most in a year in the second quarter as more residents bought homes and office investment increased amid tight housing supply.
Prices for houses, flats and other residential buildings climbed 4.1 per cent from a year earlier, according to an index published by the VDP Association of German Pfandbrief Banks. The office-price index rose 5.6 per cent, giving both measures their best gain since the second quarter of 2012.
"Price developments in German residential property are still being determined by large cities and university towns," Jens Tolckmitt, VDP's general manager, said in a statement. "Rising populations and a growing number of households there are leading to continuous demand."
Housing demand in cities such as Berlin and Frankfurt is outpacing construction as young workers move to areas where jobs are easier to find. Office prices are being pushed higher by institutions seeking a safe investment as the euro area went through a record-long recession that only ended in the last quarter.
Commercial property investments in Germany, Europe's largest economy, reached €12.5 billion (HK$129 billion) in the first half, the most since 2008, according to data compiled by London-based broker Savills.
Prices for owner-occupied apartments rose 6 per cent and residential building prices gained 4.9 per cent, driven by a 4.6 per cent increase in rents paid on new leases, VDP said.
VDP collects price data from mortgage contracts signed across Germany by its 38 member banks, which include Deutsche Bank, Commerzbank, Banco Santander and ING Groep NV.