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JLL: population growth and low interest rates cause real estate prices to increase

For several years many German cities and metropolitan centers know just one direction concerning the housing rents and property prices: up. In Berlin this tendency is quite obvious. Yet, which developments are responsible for the increase in rent and property price? The real estate firm Jones Lang Lasalle (JLL) has set itself the task of examining this particular question, investigating the connection between the price development and economic, socio-economic as well as demographic factors. The result: population development and long-term low interest rates build the strongest influences on rent and property price development.

Influx of population causes increase in price

For the study the experts of JLL examined the property prices and their development between 2002 to 2013 regarding 20 different locations throughout Germany. The research also included if increases or decreases of the price are connected to the net household incomes, the local gross domestic product, the number of population of the investigated area, the proportion of employed population as well as the interest rates.

The result of the investigation turns out clearly: The growth in population in combination with a stable household income and the current low interest policy are the key factor to increasing prices. For that reason growing prices are mainly to be recognized in cities, since the growth of population due to influx is highest. In order to prevent the resulting property shortage, experts of JLL suggest: extend the offer of residential properties. For fast achievement of that suggestion, new areas for housing construction should be displayed and existing areas re-profiled.

High willingness to invest due to low interest policy

The second important price driver is the current record low interest rate. Private as well as institutional investors profit from the low interest rates and the accordingly inexpensive loans. Therefore they increasingly decide to invest in residential properties. Even for households with average income the investment in real estate property is possible and many people bid farewell to being a tenant and welcome the status of a homeowner or a landlord. Hence, the demand for condominiums or houses continues to increase and will enable the prices to further rise.