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13082020

German Housing Market the Most Desirable Investment Target in Europe

The German housing market has become Europe’s most coveted investment destination for residential real estate investors. During the first quarter of this year, assets in Germany accounted for around 70 percent of all rental apartment buildings traded in Europe. According to an analysis done by Savills, this translates into a transaction volume of approximately eight billion euros in Germany. While lagging far behind, the second-most important market for residential property investors is the United Kingdom, which claimed a market share of eight percent.1

For the first half-year, Savills predicts a cross-European transaction volume of up to 22 billion euros in multi-dwelling units, which would match the prior-year level. This suggests that the dynamic on the residential property markets remains brisk in spite of the corona virus crisis. According to Savills, the rental housing markets show sound fundamentals. Moreover, they are less susceptible to adverse business cycles than other segments, Savills added.
 

Fast Growth in Selling Prices of German Flats

The stability of Germany’s housing market, more than other property markets, is also reflected in the latest pricing data. In the country’s eight largest cities, average selling prices showed a 9.3-percent increase over prior-year at the end of the first six months of 2020, as an analysis by JLL revealed. This means that the price growth actually accelerated, because at mid-year 2019, the corresponding growth rate had only been 6.7 percent. But the price hike during the six opening months of this year was also particularly brisk when compared with the five-year average (8.3 percent).

Selling prices in Berlin went up by nine percent, with condominiums having an average price tag of 4,840 euros per square metre. The growth was even faster in Frankfurt, where condominiums became 11.7 percent more expensive, and in Hamburg were buyers had to pay 11.4 percent more on average than during the same period a year ago.2


Plenty of Catch-up Potential in Leipzig

The five-year comparison identified a particularly dynamic growth in Leipzig. Between 2015 and 2019, condominium prices in Germany’s eighth-largest city went up by an average of 11.1 percent, faster than in any other German metropolis. One of the reasons being: The capital appreciation potential is greater here than in other metropolises because selling prices in Leipzig remain comparatively affordable. For instance, the average price tag for a condominium in Leipzig read only 2,370 euros per square metre during the first six months of 2020. That is barely a third of the average selling price in Munich, which remains the country’s priciest metropolis at 8,390 euros per square metre.

Residential rent rates also went up in Germany’s eight largest cities, as JLL reported. During the first half-year of 2020, asking rents increased by an average of five percent over prior-year period. This is up from a growth rate of just 2.3 percent a year ago.
 

1 www.haufe.de/immobilien/investment/mehrfamilienhaeuser-als-immobilienanlage_256_521196.html
2 www.haufe.de/immobilien/entwicklung-vermarktung/marktanalysen/wohnungsmarkt-trendwende-bei-mieten-preise-steigen-weiter_84324_508124.html