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Eastern German real estate market gets more and more attractive

A current survey about real estate markets states positive evidence for numerous cities located in Eastern German states. According to the housing market report Eastern Germany 2017 from the TAG Immobilien AG Eastern German cities stand out due to increasing influx, higher purchase power and rising demand. This development is causing higher purchase- and rent-prices as well as sinking vacancies. The report analyzed 27 big- and mid-sized towns in Eastern Germany.

General public can afford higher rents

Eastern German big and mid-sized towns record a strong growth of population. In each of the 27 analyzed cities the number of inhabitants rose in 2015. Due to the higher demand rents significantly rose too. In most of the towns rents increased by a two-figure percentage in 2012, most clearly in Berlin (33.4 percent) and Leipzig (25 percent). A similar development can be determined according to the real estate report in purchasing prices either in existing or newly-build apartments.

Even though rent- and purchase prices are on the rise they don’t burden the people of Eastern Germany too much. In two-thirds of the analyzed cities the housing costs even decreased between 2006 and 2017. The main reason is the higher purchase power of the residents. A powerful job market leads to sinking unemployment and higher wages, whereby the population is able to afford higher rent- and purchase prices.

Leipzig is growing and getting younger

The development of the metropolis of Saxony Leipzig is remarkable, as it’s named the “demographic superstar” in the report. Not only is Leipzig growing as no other city in Eastern Germany, apart from Berlin. The population is getting younger and younger. Due to the influx, of especially young families, the average age reduced by 1 year to 42,8 years since 2011. The economic growth of Leipzig is exceptionally positive as the unemployment rate decreased by 29 percent since 2010 according to the housing market report. Therefore it might be correct, that rent prices strongly rose in Leipzig but the housing cost quota decreased by 0.1 percent to 22.9 percent in total since 2006. For comparison only: In Berlin the housing cost quota is currently at 31.6 percent and in Potsdam it’s 29.2 percent.

High yields in mid-sized towns

The housing market report also focusses on the gross yields for residential property investors. The highest gross yield is therefore obtained in mid-sized towns whereby Görlitz is in leading position with approximately 11.8 percent. But even metropolises as Leipzig (4.8 percent), Dresden (5.3 percent) and Berlin (4.5 percent) offer investors solid future yields. Eastern German cities are according to the report worth a closer look, especially for residential property investors.