Hamburg, Berlin, Munich: Rent rates will outpace purchase prices for residential real estate in Germany's metropolises. This is the upshot of the spring report presented by the ZIA German Property Federation. However, the experts see no signs of a price bubble – creating ideal conditions for private investors.
Munich: Steepest Price Hike
These are the finding of the Spring Real Estate Industry Report masterminded by Lars Feld who is a member of the council of experts colloquially referred to as the “Wirtschaftsweisen” – the “economy sages” – on behalf of the ZIA German Property Federation, one of the leading trade associations in the industry. While rent rates for Germany as a whole are expected to grow at a modest pace of just three percent in 2014, rental growth in cities with populations of more than a million will exceed the average by far. Then as now, Munich will take the lead and register a rent hikes of an estimated 6.9 percent in the coming months, according to the surveys conducted for the spring report. Runner-up is Berlin which, while remaining below the rent level of Munich, has experienced a price hike by 47 percent over the past eight years. The survey suggests that rent rates in Berlin will rise by a whopping 6.6 percent in 2014. Similarly, rents in Cologne, Hamburg, and Frankfurt are expected to increase by up to 4.5 percent before the end of the year.
No Real Estate Price Bubble in Sight
Purchase prices for condominiums in Germany's metropolises are pushing up steadily, but fail to match the pace of rent rates. This makes buying a condominium a lucrative proposition at the moment. Here as there, private investors will find the major cities particularly attractive. Rent hikes will remain regionally limited, and concentrate mainly on the metropolises. Demand for existing real estate in the rural areas has noticeably slackened.
The spectre of a real estate bubble in the big cities, which currently haunts some potential property buyers, has no basis in fact, according to the ZIA. “The price upside is backed by sound fundamentals. It is attributable to risen demand, is limited to certain regions, and remains within normal limits,” the reports states. It goes on to say that there are no signs for inflated construction activity on the German market, which would typically coincide with the formation of a real estate bubble. Indeed, a look at the stats shows that at no point in the annals of the Federal Republic of Germany has the construction volume been lower.