The German housing market is characterised by strong price and rent increases. The uncertain situation on the financial markets and low interest rate levels are increasing the demand for residential real estate for owner-occupancy or as a capital investment. This trend is particularly evident in urban agglomerations, large cities, university towns and in popular holiday destinations. This is the third Engel & Völkers "Residential Real Estate Market Report for Germany". The comprehensive analysis examines the development of residential areas and property prices in 2015/2016 for 75 locations.
Freehold apartments: new top square meter prices in certain locations
"In more than two-thirds of the cities we looked at, we identified price increases for freehold apartments in very good and good residential locations", says Kai Enders, member of the executive board of Engel & Völkers AG. Compared to the previous year, both entry-level prices and peak prices of apartments increased significantly in metropolitan areas. In Hamburg's prime locations, for example, the average peak price per square meter climbed from 16,000 euros/m2 in 2014 to 18,000 euros in the first half of 2015. In very good residential areas of Berlin, the peak values remained unchanged at 15,000 Euro/m², which corresponds to the levels of the previous year. In the first half of 2015, the minimum prices for freehold apartments in good residential areas amounted to at least 3,100 euro/m² (2014: 2,500 euro/m²). Because of the high price level in the most popular residential areas, mid-market and standard residential areas were also becoming increasingly attractive. The prices in these areas increased significantly, especially in the university towns.
Single- and double-occupancy homes: absolute purchase prices of up to 13.5 million euros
Entry-level prices have also climbed for single- and double-occupancy homes. Compared to the previous year, the lower price limit for very good residential areas in Munich rose by 200,000 euros in the first half of 2015. The average peak price in the Bavarian state capital also increased slightly in the past year to 13.5 million euros. In a Germany-wide comparison for the first half of 2015, the highest prices for single- and double-occupancy homes were recorded in Munich.
Transaction volume for residential homes in 2014: Hamburg cracks the one billion mark
The scarce supply of residential space in many areas and the corresponding demand surplus is reflected in the transaction volume for single- and double-occupancy homes. While the number of properties sold in Germany in 2014 decreased by around two percent to 28.831, the sales revenue for the same period rose by 5.7 percent to around 10.2 billion euros in the areas under review by Engel & Völkers. In the transaction volume ranking for single- and double-occupancy homes (2014), Hamburg still ranks first and was the only location in Germany with a sales revenue in excess of 1.4 billion euros. Following in second place is Munich, with a transaction volume of around 966 million euros.
Transaction volume for residential apartments in 2014: the front-runners are Munich, Berlin and Hamburg
In the transaction volume ranking for freehold apartments in 2014, Munich leads with a total turnover of around 4.05 billion euros. Berlin is in second place with around 3.78 billion euros, followed by Hamburg. The Hanseatic city has increased its prior-year earnings by 11.4 percent to about 1.99 billion euros. In the top ten, the biggest leap forward was taken by Stuttgart, which moved up in the rankings from eighth to sixth place. The Baden-Württemberg metropolis achieved a revenue increase of 22.4 percent, the highest growth rate of the top-ranked locations. The top ten also includes the growing cities of Leipzig and Dresden, which are becoming increasingly popular as residential locations, especially for young people between the ages of 20 and 35 years.
Outlook: Excess demand is leading to rising residential real estate prices
In the view of Engel & Völkers, the current development in the German housing market will almost certainly continue in the future for all reviewed locations. The growing demand for residential property, which exceeds the number of building completions, will continue to lead to price increases in many German cities.
The e-book "Residential Real Estate Market Report for Germany 2015/2016" is available here.