The performance of Germany's condominium market remains rather dynamic. This is the upshot of the 2015 Accentro Homeownership Report, which is based on the data of property valuation committees covering the 82 largest housing markets in Germany. Perhaps the most important insight is this: The revenue generated in the analysed cities last year exceeded the revenue total of 2013 by 3.6 percent, ending the year with an all-time record of 24.9 billion euros. While the number of condominiums sold across Germany in 2014 was only 128,602 and thus marked a year-on-year decline by -3.3 percent, 39 housing markets registered a year-on-year growth in the number of condo sales. The fact that the turnover increased despite the drop in the number of apartments sold is explained by the steady upward trend for condominium prices in 2014: The average price tag for condominiums was 193,628 euros, which implies a price hike of 7.2 percent year on year.
Certain East German Cities Have a Decidedly Active Condo Market
In the past, property buyers used to focus on Germany's metropolises. So there is nothing surprising about the neck-to-neck race between Munich and Berlin that the Homeownership Report has observed for several years now. In his essay about Berlin's condominium market and the potential it offers through new development, Jacopo Mingazzini, Managing Director of Accentro GmbH, elaborates which of the two cities will come out on top in the current reporting year.
With Munich and Berlin taking the lead in terms of condominiums bought and sold, cities in Central and East Germany have previously been more or less ignored. At first glance, this may be unsurprising insofar as it is well known that many regions in Eastern Germany have been subject to negative demographics since the country's reunification in 1990 while also showing a lower economic output and income levels than many West German states. But to make sweeping statements would be misleading: Some of East Germany's major cities clearly take exception to the trend, as the Homeownership Report 2015 shows. Most notably, the conurbations Leipzig and Dresden, both in Saxony, have regularly ranked among the top ten in recent years. The number of apartments sold during the current reporting year was 4,250 in Leipzig and 3,631 in Dresden. The sales resulted in revenues of 716.9 million euros and 512.2 million euros, respectively. Another city that sticks out in the new Homeownership Report is Chemnitz. Here, in south-western Saxony, the number of apartments sold climbed by 10.6 percent, causing the city to rank fifteenth nationwide. Whether or not this marks the onset of a positive long-term trend remains to be seen. However, there is reason to argue that several East German conurbations might well establish themselves as stabilising anchors in a region otherwise economically underdeveloped.
Condominium Market Driven by Sales of New-Build Flats
One of the leading causes for the record turnover in this latest year under review is clearly the construction activity which has gathered momentum lately. Specifically, 24,734 new-build flats were sold last year, which is 2.9 percent more than in 2013. Over the past five years, the number of condominium sales has actually increased by around 50 percent. At the same time, the share of new-build flats in the total number of flats sold went up as well: As recently as 2013, new completions accounted for 18.1 percent of all condominiums sold, whereas the ratio in the current reporting year is 19.2 percent. This means that nearly one in every five condominiums sold in Germany's 82 largest cities was a new-build flat. It should be remembered, however, that surveys in Hamburg – one of the most important housing markets in Germany – makes no distinction between new and existing units.
There is reason to believe that the construction activities will have a decisive impact on the (sales) dynamic in Germany's residential markets, especially in the metropolises with known housing shortages where new development is most urgently required. The recent rise in the number of planning permits issued suggests that the cities in question are perfectly aware of the situation. According to an analysis conducted by the BBSR Federal Institute for Research on Building, Urban Affairs and Spatial Development, the number of planning permits granted went up by 18 percent year on year. This means that one in five planning permits was issued in one of Germany's “Big Seven” cities. It is now up to the body politic to expedite the new development projects and to expand the supply in new housing. We will have to wait and see until next year's Homeownership Report is published to find out whether or not this will be achieved, and whether the ongoing year will see yet another year-on-year increase in the number of new-build flats changing hands.