Market Report on residential real estate in Germany: Prices at an all-time high

The upward trend on Germany’s residential real estate market continues unabated. In the first half-year of 2018, asking prices for detached and semi-detached houses rose by approximately 7 percent on average over the previous year. This marks a higher growth than the market segment for freehold apartments (+6.4 percent). Residential real estate remains attractive, due to the lack of investment alternatives, the low interest rate, and the sustained level of urban migration. “As long as the property industry is not able to meet the growing demand, prices in inner-city locations and the surrounding regions will continue to rise,” forecasts Kai Enders, Member of the Board of Engel & Völkers AG. In its latest “Market Report for Residential Property in Germany”, Engel & Völkers examines market and price developments in 60 selected cities in 2018, as well as the transaction volume in 2017.

Hamburg - How did real estate prices in Germany develop in 2018? The market report for residential real estate by Engel & Völkers provides insights.
Image source: Engel & Völkers Munich

Top prices for real estate in Germany’s major cities    

The largest German cities lead in the property price ranking. In the segment for freehold apartments, Munich recorded the highest average  prices per square metre in the first half-year of 2018, at 7,630 euros, followed by Frankfurt (5,408 euros) and Hamburg (4,679 euros). With an average property value of 448,000 euros for freehold apartments, Munich has the highest sale prices of all locations in the report (average property value in Germany: 253,000 euros). In the segment for detached and semi-detached houses, the Bavarian city also registered the highest sale price, at 16 million euros.      

Transaction volume for houses in 2018: Record sales in urban hubs

As in the previous year, Hamburg once again leads the ranking table for turnover on the residential market, at 1.67 billion euros. With a transaction volume of 1.26 billion euros, Munich has overtaken Germany’s capital Berlin (1.21 billion euros) to claim second place in the ranking. Transaction volumes in university cities such as Konstanz, Bielefeld and Aachen have also risen considerably over the previous year. In the view of Engel & Völkers, this can be attributed to the fact that new building activity in urban centres is not meeting the required need for housing. Property buyers and investors are therefore increasingly turning their attention to the surrounding regions in greater metropolitan areas.

Significant rise in sales in smaller cities     

In the apartment segment, Berlin leads the turnover ranking at 5.7 billion euros. With approximately 21,000 sales, more than double as many apartments were brokered here than in Munich, which ranks in second place. Along with Berlin and Munich, the cities of Hamburg, Frankfurt am Main, Cologne, Stuttgart and Düsseldorf together account for over 61 percent of the overall transaction volume on the market for apartments. Key reasons for the sustained level of buyer interest are the good infrastructure, the attractive employment prospects and educational opportunities. In comparison, smaller cities are benefiting from factors including reurbanisation, various housing policies and price level differences, and have increased their transaction volume. In Chemnitz, property sales have even doubled to 146.4 million euros within one year (+109 percent). Other cities like Lübeck, Magdeburg and Fürth increased their transaction volume significantly over the previous year.

Outlook: Investment opportunities in up-and-coming regions            

While the property market in metropolitan areas will continue to see positive growth, above-average rates of growth can also be expected in medium-sized and smaller cities in the future. Good and average locations here hold a great deal of development potential and attractive investment opportunities. “The strong economy wage increases and low rate of interest create the ideal financing conditions at present for buying property in Germany,” said Kai Enders.

This is the sixth time that Engel & Völkers has published its “Market Report for Residential Property in Germany”. The latest survey is also available here as an E-Book (in German).

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