The upturn on private residential property market in Germany continues. This is reflected, for example, in the prices for freehold apartments, which rose on average by around 8.6 percent in the first half-year of 2016 over the previous year. Growth in this segment was even more dynamic than for detached and semi-detached homes, with average price rises of around 6.7 percent. “Purchasing properties remains worthwhile, in light of the current low rate of interest and a lack of attractive investment alternatives,” said Kai Enders, Member of the Board of Engel & Völkers AG.
In the current “Market Report on Residential Property in Germany”, Engel & Völkers assesses market and price trends in 51 selected locations for 2016, in addition to an overview of the transaction volume in 2015.
Hamburg still frontrunner for top square metre prices
Germany’s major cities recorded the highest prices per square metre for freehold apartments in the first half-year of 2016. With an average top price per square metre of 18,000 euros, Hamburg – as in 2015 – was the highest priced location, closely followed by Munich at 16,500 euros and Berlin at 15,000 euros. Good and average locations in these cities are also becoming increasingly attractive, due to the high prices and strong demand for apartments in those locations traditionally most desirable. Freehold apartment prices have also risen outside of these major cities, for example in university cities such as Regensburg and in economically strong East German cities like Leipzig. Top prices for detached and semi-detached homes saw a slight increase over 2015 when compared across Germany as a whole. In the first half-year of 2016, the highest asking price was around 16 million euros in Starnberg. Munich ranked in second place at 14 million euros with Hamburg in third place at 7 million euros. Asking prices for the sale of exceptional homes were higher in both segments. These occasional price highs are unrelated to other trends governing the market.
“Big Seven” account for majority of transaction volume
Overall transaction volume, i.e. the total sum price of all properties brokered, underwent extremely positive growth in 2015 in the locations featured in the report. “Transaction volume increased significantly in both segments, with 15 percent for freehold apartments and 10.3 percent for detached and semi-detached homes,” Mr. Enders confirmed. In terms of freehold apartments, Germany’s seven largest cities (the “Big Seven”) head the ranking of absolute transaction volumes. Berlin defends its top position from the previous year, with a total turnover of around 5.28 billion euros, followed by Munich at approx. 4.58 billion euros and Hamburg at approx. 2.44 billion euros. These three cities combined account for around 46 percent of the total transaction volume. The highest percentage rise was in Bad Homburg, at 77 percent.
Hamburg leads the ranking of absolute transaction volumes for detached and semi-detached homes in 2015, at around 1.63 billion euros. Berlin comes in second place, with a 29 percent growth over the previous year to approx. 1.23 billion euros. For the first time, Munich also exceeded the billion-euro mark, coming in third place at some 1.06 billion euros. Development in this segment was particularly positive in cities such as Mannheim, Potsdam and Leipzig, all of which saw an increase in turnover of more than 30 percent over 2014.
Outlook: Attention shifting to locations away from the major cities
Engel & Völkers is not anticipating a short-term easing on Germany’s residential property market in 2017. This applies both to the “Big Seven” and to other large and medium-sized cities. “Properties in cities and towns outside of the major metropolitan areas are increasingly entering the radar of capital investors, due to the good prospects for ROI,” said Kai Enders. During the course of the year, Engel & Völkers also forecasts a high level of demand met by a limited availability of homes in those locations in the report. As a result, further rises in residential property prices can be expected in many German towns and cities.
It is the fourth time that Engel & Völkers has published the “Market Report on Residential Property in Germany”. The current report (in German) can be downloaded here.