German Home Prices Increase the Most in 10 Years

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German home prices increased by the greatest amount in at least 10 years in 2013, as investors turned to the real estate market.

Prices for all properties -- house, apartments and residential buildings -- increased four percent in 2013 compared to the previous year, Bloomberg reports, using data from the VDP Association of German Pfandbrief Banks. 

The price increase in 2013 was the largest gain since at least 2003. However, home prices increased 3.4 percent in the final quarter, the smallest increase in five quarters. 

The increase in housing activity is driven by low borrowing cost and a supply shortage in cities such as Berlin and Frankfurt. 

"Demand for residential properties remains high," VDP's general manager Jens Tolckmitt, said in the statement. "Large cities and university towns continue to be at the center of attention."

The VDP data shows prices increased 4.9 percent in 2013 for owner-occupied condominiums and 4.7 percent for apartment buildings, due in part to a 4.2 percent increase in rents paid for new leases. Single-family homes recorded the lowest increase, with 2.6 percent. 

Price data is collected by VDP from mortgage contracts signed by 38 member banks across Germany, including Deutsche Bank AG, Commerzbank AG, Banco Santander SA (SAN) and ING Groep NV, (INGA), Bloomberg reports.