The developments on the German property market in recent years have raised the question for many potential buyers and sellers as to whether property prices in Germany will continue to rise. At this point we therefore take a look at how prices have developed recently and which current factors will influence property prices in Germany in the future:
In recent years, the German real estate market as a whole has seen positive property price developments. The conurbations of major German cities in particular were and continue to be characterised by strong price increases. Despite rising asking prices, the purchase of a property is still attractive for investors and owner-occupiers. This is reflected in the transaction volume for residential real estate, which is forecast to continue to grow in 2019. It is expected that the total volume for single- and two-family homes and condominiums will amount to a total of 137.3 billion euros, exceeding the 2018 level of 132.2 billion euros.
There was also a further increase in the residential and commercial buildings and apartment buildings segment to 33.6 billion euros in 2018. For 2019, further growth to 35.5 billion euros is forecast.
1. What factors influence property prices in Germany?
Potential buyers often ask themselves what factors influence property prices in Germany and why they seem to have been rising continuously in recent years. The value of a property is determined by numerous aspects. These include, for example, the year of construction, features, structural condition, location and surrounding infrastructure. Of course, supply and demand also determine property prices in Germany to a considerable extent. In Germany, especially in the economically strong conurbations, there has been a persistent demand overhang for years - the number of available properties cannot therefore cover the actual demand. This is causing property prices in Germany to rise, particularly in the major cities, despite the current construction boom.
2. How are property prices in Germany developing?
An increase in property prices in Germany is expected for the coming year, particularly in Germany's conurbations. There are many reasons why property prices and rents in Germany will continue to rise. An important factor is the discrepancy between the number of completed dwellings and the demand on the property market: Especially in Germany's major cities such as Berlin, Munich and Hamburg, the number of new buildings cannot meet the actual demand. Nevertheless, it is also necessary to differentiate between different locations with regard to the development of property prices in Germany. Thus, despite the generally high price level, there is a clear east-west divide and a sometimes-significant difference between property prices in rural areas and in the cities. In our Residential Property Market Report for Germany 2020/2021 you will find detailed information on how prices and rents are likely to develop in the 64 largest cities (unfortunately, the report is currently only available in German).
In our Residential and Commercial Buildings Market Report 2020 you will find developments and property prices of multi-family houses, apartment buildings and residential and commercial buildings. The picture is the same for these investment properties: prices are rising, especially in the metropolitan regions. Although this led to yield compressions in many places, the purchase of apartment buildings remains an attractive investment strategy that is still extremely profitable. In particular the persistently low level of interest rates leads to good financing opportunities. Overall, prices for residential and commercial properties in Germany rose by an average of 56.7 % between 2015 and 2020 (first half of the year).
3. Condominium square metre prices
In the condominium segment, Munich leads the Germany-wide 2020 ranking with square metre prices averaging 9,053 euros. The Bavarian capital is followed by Starnberg in second place - here prices average 7,473 euros per square metre. In third place is Frankfurt, the metropolis on the Main, with average prices of 6,453 euros per square metre. In fourth place is Constance with 5,719 euros per square metre.
4. House prices for single- and two-family homes
The purchase prices for detached and semi-detached houses have also continued to rise in many German cities in 2020. The undisputed leader in this segment is Starnberg with average house prices of 2.08 million euros. In second place is the Bavarian capital of Munich, which has an average asking price of 1.51 million euros for detached and semi-detached houses. Third place goes to Bad Homburg - here a single or two-family house is offered for an average of 1.49 million euros. Fourth place goes to Heidelberg, where the average offer price is 1.16 million euros.
5. Property prices for apartment buildings and residential and commercial buildings
Property prices in the investment property segment (apartment buildings, apartment blocks, residential and commercial buildings) have risen sharply in recent years. In the context of the Residential and Commercial Building Market Report Germany 2019/2020, 67 cities were examined more closely. In the first half of 2019, the highest offer prices in Munich were 7,468 euros per square metre. This is followed at a greater distance by other major cities such as Frankfurt (4,228) and Stuttgart (3,796). In fourth place, Heidelberg surprises with EUR 3,794 per square meter and an increase of 29.2% over the previous year. You can find the complete ranking of the nationwide price dynamics here.
Other property prices
6. Is the purchase of real estate cheaper than generally assumed?
According to a study by the Institut der deutschen Wirtschaft (IW Köln), in 98% of districts and cities, owner-occupied housing is cheaper than renting. The persistently low level of interest rates and rental growth have contributed to this. In addition, although purchase prices for residential property have risen, they have not fallen as much as interest rates. As a result, the total financing volume for purchases has decreased, in some cases significantly.
7. Where property prices are rising
The top 7 cities are made up of those locations that have the highest property price level in Germany. In our forecast, we have summarised for you how property prices here are likely to develop in the future:
The German capital continues to grow as an attractive and multicultural location. This is noticeable on the real estate market: Real estate prices are expected to rise in 2021 in all locations, both in the condominium segment and in single and two-family homes. In the central, very good locations, houses achieve up to 9 million euros, and condominiums in the best locations reach square metre prices of up to 21,000 euros. In the segment of residential and commercial buildings it remains to be seen what effects the rent cap will have. However, Berlin remains a very attractive investment location due to the strong surplus demand. You will discover even more well-founded insights in our report on property prices in Berlin.
You will find even more in-depth insights in our report on Berlin property prices.
The Hanseatic city is without doubt one of the most sought-after residential locations in Germany. As a result, property prices and rents have been rising for years. In the very good locations around the Alster and along the Elbe, however, it is assumed that supply prices will stabilise in the future. In all other locations, further increases in property prices can be expected. Currently the price level for single and two-family houses in very good locations is up to 15 million euros. For condominiums in this location, offer prices of up to 25,000 euros per square meter are being achieved. Apartment buildings in Hamburg in prime locations are sold for up to 8,000 euros per square metre (up to a factor of 45). The price trend continues to rise - also on the outskirts of the city and in the surrounding area.
Further insights can be found in our report on Hamburg property prices.
Property prices in Munich continue to rise. The Bavarian state capital occupies the top position nationwide in the current Engel & Völkers ranking of offered prices for condominiums. At an average of 9,053 euros per square metre, the local condominiums are more cost-intensive than anywhere else in Germany. However, the price level in the city on the Isar seems to be gradually stabilising: In the good to medium locations, no major price increases are currently expected. In the very good locations, investors and owners are already paying up to 25,000 euros per square metre for a condominium and 20 million euros for single and two-family houses. For luxury flats, prices of up to 32,000 euros/m² have even been called for in 2018. For multi-family houses in Munich, 13,000 euros per square metre were demanded in this period in prime locations. Here, factors of up to 43 are even achieved, which is the highest value in Germany. Our real estate agents in Munich will also be happy to advise you personally!
In our report on Munich property prices you will find even more information on this topic.
The Rhine metropolis shows a high dynamic in the development of property prices: For single- and two-family homes, a further price increase is expected in the very good to mid-range locations, while the secondary locations are expected to remain price stable. In the condominium segment, a stabilisation of the price level is also expected for the very good and secondary locations. In the good and mid-range locations, prices for condominiums are likely to continue to rise. Single- and two-family homes reach prices of up to 6 million euros, while top prices of up to 15,000 euros per square metre are achieved for condominiums. For exceptional properties in the premium segment, prices of up to 24,000 euros per square metre were even asked in 2018. In the residential and commercial property segment, price increases are likely in all locations. Property prices of up to 5,000 euros can be achieved here.
Also find out all details about the Cologne property prices!
Frankfurt am Main
Frankfurt am Main currently seems to have reached the zenith for real estate prices. For single and two-family houses, the assumption is that property prices will remain constant in the coming year - in all locations. Prices for condominiums are also expected to stabilise. Even now, peak prices of up to 4.7 million euros are being achieved in the segment of single and two-family houses, and condominiums are reaching square metre prices of up to 14,500 euros. In the case of investment properties (residential and commercial buildings/ apartment buildings), price stabilisation is expected in all locations. In top locations, property prices of up to 7,200 euros per square metre are being achieved.
You can get even more insights in our report on Frankfurt am Main property prices.
As an attractive business and residential location, rising property prices are also expected for Düsseldorf in many locations. In the case of detached and semi-detached houses, this applies above all to areas in very good locations. In contrast, prices are likely to remain stable in good and simple locations. The following applies to condominiums: In the very good to medium locations, prices are likely to remain stable. The peak prices for single and two-family houses currently stand at up to 8 million euros, while prices of up to 15,000 euros per square metre are achieved for condominiums. For residential and commercial buildings, property prices in Düsseldorf are up to 4,700 euros per square metre. Price increases are likely, especially in simple locations.
Read our report for more details about Düsseldorf property prices!
The Swabian metropolis of Stuttgart can benefit from a slight easing of tension thanks to increased construction activity. For both segments, single and two-family houses and condominiums, prices are expected to stabilise in all locations. The current purchase prices for detached and semi-detached houses are at 4.5 million euros; in the case of condominiums, square metre prices of up to 13,000 euros have already been achieved, for exceptional properties even up to 16,600 euros/m². In the case of apartment buildings, further price increases are likely in all locations. Square metre prices are already reaching up to 5,350 euros. You can read even more information in our report on Stuttgart property prices.
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Current property prices in Germany: GEWOS - IMA property market analysis, property valuation committees, Engel & Völkers Residential, Engel & Völkers Commercial
How are property prices developing? : empirica-systeme, Engel & Völkers Commercial
Condominium square metre prices: empirica-systeme, Engel & Völkers Residential
House prices: property prices for single- and two-family homes: empirica-systeme, Engel & Völkers Residential
Property prices for apartment buildings/ residential and commercial buildings: empirica-systeme, Engel & Völkers Commercial
Buying property is cheaper than generally assumed: IW Köln, Engel & Völkers Residential
Where property prices are rising: empirica-systeme, property valuation committees, Engel & Völkers Residential, Engel & Völkers Commercial