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Holiday properties in Germany – A stable market with good prospects and emotional returns

The Germans’ desire to travel is causing an upturn on the domestic tourism market, which underwent a significant period of recovery in 2022. 51.8 million registered overnight stays in commercially rented holiday properties exceeds the previous record in this market segment set in 2019 (48.1 million overnight stays). Holiday houses and apartments have also further established their status as the preferred type of accommodation for tourists, and as an asset class that offers a stability ideal for protecting assets in the long term. In recent years, buyer demand for holiday properties has far exceeded the supply in popular holiday regions. “The steady rise in construction interest rates from the second quarter of 2022 onwards resulted in a certain reluctance to buy in average and basic locations in some holiday resorts,” says Till-Fabian Zalewski, CEO of Engel & Völkers for Germany, Austria and Switzerland, who elaborates: “However, the impact of the interest rate hikes is significantly less than in the market segment for first homes, as holiday properties are generally purchased by a financially robust clientele in a position to fund their investment with a high private equity ratio.”           

The “Market Report on Holiday Properties in Germany 2023” is the tenth report to be published by Engel & Völkers. It analyses the market and price development in Germany’s 42 most important holiday regions on the North Sea and Baltic Sea, in the Alps, in the Alpine foothills, on Lake Constance, in the Black Forest and the Mecklenburg Lake District.

Eco-friendly holiday properties ensure value retention and appreciation

Increased energy costs are causing modern and well renovated holiday properties to be in very high demand. Owners of traditional properties are faced with the challenge of modernisation work to improve energy efficiency. As a result, Engel & Völkers is registering increased interest in holiday properties that meet premium standards in every respect and are located in evergreen tourist regions that are popular throughout the year.  

In the market segment for holiday properties, the top prices are still to be found on the island of Sylt, on Lake Starnberg and on Lake Tegernsee. Prices here for premium properties in very good locations can reach as much as 18 million euros – and up to as much as 30 million euros in the case of rare and exceptional homes. The highest prices on the Baltic Sea are being reached on the islands of Rügen (up to 4.3 million euros) and Usedom (up to 3.5 million euros), as well as in the Bay of Lübeck and in particular in the resort of Timmendorfer Strand (up to 3 million euros). In the Alps, the highest prices can be found in the ski resorts of Garmisch-Partenkirchen (up to 6 million euros) and Oberstdorf (up to 5 million euros). Prices range up to 2.9 million euros in the southern part of the Black Forest.

In the market segment for holiday apartments, the top prices can be found on the islands of Norderney and Sylt, as well as on Lake Starnberg and Lake Tegernsee in southern Germany. On Norderney, prices per square metre in very good locations range up to 28,000 euros. Exceptional properties are selling for as much as 31,000 euros per square metre. By contrast, the lowest prices for holiday apartments up to now are in the Mecklenburg Lake District (starting at approx. 3,000 euros per square metre), on the North Sea in the Wilhelmshaven region (starting at approx. 1,000 euros per square metre), in Büsum (starting at approx. 2,000 euros per square metre) and in Husum (starting at approx. 2,500 euros per square metre), as well as on the Baltic Sea in Wismar/Island of Poel, Greifswald and Stralsund (starting at approx. 2,000 euros per square metre). The lowest entry-level prices in Germany’s southern holiday regions can be found in more average locations on Lake Chiemsee (starting at approx. 3,500 euros per square metre) and in the Black Forest (starting at approx. 1,700 euros per square metre).

Outlook: ROI potential from rentals through the year

Germany’s holiday properties are set to remain an attractive means of old-age financial provision and are currently proving just how resistant to crisis they are. There is an emerging trend towards mixed usage, due to the demand for holiday rentals coupled with the increased mobility that remote working has enabled. Consequently, clients are acquiring their desired property in their favourite holiday destination both to use themselves for staycations and to rent out for some of the year. This rental income can then be used to help cover running and maintenance costs. Well-organised holiday rentals and a high occupancy rate can often generate returns in excess of four percent. An investment in a holiday house or apartment will retain its appeal in future, due to the strong demand from buyers and extremely limited availability. “Further price corrections in individual cases can be expected in simpler locations for as long as interest rates continue to rise. That said, since many prospective buyers have only postponed their plans to invest in a holiday property, prices are expected to rise again in the medium term – in those places where demand has dropped slightly. In the premium segment we expect to see a continuation in the stable prices,” Till-Fabian Zalewski says.

- Thatched holiday domicile in the heart of Sylt (c) Engel & Völkers Kampen
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