Germany's new housing strategy: Creating new cities for buyers.

In the past two decades, Germany has worked to revitalize its auto industry and exports. This helped it remain a leader in GDP growth during the 2000s. But times are changing. Rising energy prices, supply disruptions due to Covid-19 and inflation have made Germany more vulnerable. The country is one of the few major economies in the world that will see a contraction in 2023.

The German housing market has also taken a downturn. According to government data, residential house prices fell 9.9 percent from a year ago in the second quarter, the biggest drop since 2000. New home construction has fallen due to rising construction costs and uncertainty among buyers. Country''Intends to build 400,000 apartments a year to meet growing demand from the public, but faces challenges from rising interest rates and an energy crisis linked to the war in Ukraine.

For luxury real estate buyers, now may be a good time to enter the market at a lower price in cities with more diverse economies, such as Leipzig, Munich, Berlin or Hamburg, which are poised for long-term house price growth. "These cities are relatively stable and maintain price growth even in times of crisis," said Kirill Radev, CEO of Ziegert Group, a Berlin-based real estate firm.

Berlin

Housing prices in Berlin fell the least compared to other major cities''Germany, down 5% year-on-year, according to the Ziegert Group. The average price of an apartment in Berlin is 5,238 euros ($5,528) per square meter. "Compared to other megacities such as Paris or London, residential real estate prices in Berlin are still significantly lower, but the economically strong capital is well positioned to catch up," Radav said. "Major companies such as Tesla, Deutsche Bahn and Charité are based here, and Berlin is also known for its unique and innovative startup scene. "

The city is home to crypto startup Matter Labs and solar panel installation company Enpal, which are among the leading self-developed startups in Germany, according to tech news site Sifted. Despite the''s proliferation of remote working, the city is expected to create almost 40000 new office jobs by the end of 2023 and into 2024, according to a study by Oxford Economics. A host of energy-focused companies in Berlin could also benefit from Germany's €177.5 billion Climate and Transformation Fund, which will go towards initiatives such as decarbonization and hydrogen technology. Radev is confident of Berlin's success and predicts that house prices in the city will increase by a modest 1.5 percent in 2024.

Silicia Saxony and Leipzig

In recent years, Saxony has become a center of chip production. One third of all chips in Europe are made in Saxony, German Chancellor Olaf Scholz said during''s groundbreaking ceremony for the new facility in Dresden, the region's second largest city. European Commission President Ursula von der Leyen called the city a 'digital beacon in Europe'. In Dresden, the average housing price in the second quarter of this year was 3,077 euros per square meter, down 3.5 percent from last year.

In the Weisser Hirsch district, a luxury residential area on a hill north of the city center, home prices remain at record highs, at around 4,204 euros per square meter compared with 3,398 euros per square meter in 2020, according to Immowelt, a German real estate agency.

Leipzig, the region's largest city and a popular destination for luxury real estate buyers, saw a massive revival before Covid-19 with the arrival of new skyscrapers and''luxury homes throughout the city.