Berlin and Leipzig register strong increases in rent
Rent prices in eight German metropolises (including Leipzig) increased less in the second half-year of 2017 compared to the previous year, according to a current JLL-survey. Exemptions are Berlin and Leipzig where yearly rents increased by 9.1 percent or rather 7.5 percent. Therefore both cities stand out, as rent prices in the other metropolises are currently stagnating.1
The reason for the strong price growth in Berlin and Leipzig is, according to JLL, the fact that both cities have got high influx rates and simultaneously significant low new construction activities. Since 2004 rents in Berlin almost doubled and in Leipzig they rose by 40 percent. In the biggest city of Saxony, experts forecast a rapid rent development, as Leipzig is currently ‘at the beginning of its rent price cycle’. Regarding German metropolises in total, JLL expects that rent-increases will be moderate in middle-term, but still above the inflation rate.
Residential property gains attractiveness
Because of the fact that rents in metropolises are already at a very high level, JLL experts notice that more and more people prefer residential property. The purchase prices for condos are steadily on the rise. In Berlin, condo prices raised by 9.2 percent, while in Leipzig they raised by 6.5 percent, regarding a yearly period. Condos in Leipzig are still the cheapest compared to condos in other metropolises.
Especially the low construction interest rates make residential property interesting for loads of people. Due to low interest rates and higher salaries residential property is still affordable even in times of high purchase prices. This was lately proofed by the affordability indices of the IVD Germany.2 The IVD calculates since 2000 every year on the basis of the net income of household’s interest rates and purchase prices and concludes how well households can afford the monthly load of a house buying in the cities where they live in. The affordability of residential property decreased compared to the previous year, while it’s still on the highest level over the last 17 years. In 8 metropolises (including Leipzig), both Berlin and Leipzig, have the best affordability rate for residential property. The current ACCENTRO-IW-Housing cost report, that also examined the affordability of residential property, came to a similar conclusion.3 According to the study of the German Economic Institute (IW) Cologne on behalf of the ACCENTRO Real Estate AG, the purchase of a condo in Germany is about 33 percent more favorable than renting.