German housing prices fell by the most since records began in the second quarter as high interest rates and rising materials costs took their toll on the property market in Europe's largest economy, according to government data.

Residential property prices fell by 9.9% year-on-year, the steepest decline since the start of data collection in 2000, the federal statistics office reported last week.

Prices fell by 1.5% on the quarter, with steeper declines in larger cities than in more sparsely populated areas. In cities such as Berlin, Hamburg, and Munich, apartment prices fell by 9.8% and single and two-family house prices dropped by 12.6% on the year.

For a decade, low-interest rates have fuelled a property boom in Europe’s largest real estate investment market. A sharp rise in rates and increasing construction costs have put an end to the run, tipping a string of developers into insolvency as deals froze and prices fell.

Building permits for apartments in Germany declined 31.5% in July from a year earlier, the statistics office said, as construction prices rose by almost 9% on the year. Germany aims to build 400,000 apartments a year but has struggled to meet this goal.