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Prices in Greater Metro Areas Skyrocketing

Prices in the housing markets of Germany’s major cities have continued to soar in 2018. Especially the metropolises reported another steep price hike – condominium prices in the “Big Seven” cities went up by anywhere between 9.6 percent (Düsseldorf) and 15.2 percent (Berlin) year on year, as the latest Spring Report by the Immoblienweisen expert panel shows.1 The supply shortage and the high demand have ensured that the price pressure in the conurbations remains high. It is therefore unsurprising that even and especially the cities in the greater metro regions benefit from the situation and report rising prices. This is the upshot of the latest report released by Deutsche Bundesbank.2

The fact that a growing number of smaller cities ranks among the places with the strongest price growth is therefore due to the high price level and low availability of residential accommodation in the metropolises lately. The report suggests that many people have lost hope of finding a home directly in Munich, Hamburg, Stuttgart or Berlin and are therefore checking out suburban alternatives.

Overflow Movements Due to High Prices

The tendency is also highlighted in the Spring Report of the Immobilienweisen expert panel of the ZIA German Property Federation, the trade association of Germany’s real estate industry. Among the cities that benefit from their sound infrastructure and proximity to the metropolises of Munich and Stuttgart, respectively, are Augsburg, Ingolstadt and Heilbronn – which now rank among the nine leading cities in terms of rental uplift.3

This confirms the account provided by the 11th ACCENTRO Homeownership Report in the fall of 2018. According to the latter, prices in cities close to metropolises have experienced steep growth.4 In the Frankfurt metro region, the city of Offenbach registered a price hike of 90.7 percent for condominiums between 2012 and 2017, while prices in Darmstadt increased by 68.1 percent. In Potsdam near Berlin, condominium prices rose by 40.1 percent during the same period.

Munich No Longer the Priciest Rental Market

A strong indicator for price growth is therefore the proximity of a given city to the closest metropolis. Apart from selling prices, the rent rates in the suburbs of major cities have also made substantial gains or even outpaced the nearby metropolises. According to an analysis conducted by the F+B research company that was based on 250 rent indices, there are only two metropolises among the top ten cities with the highest local reference rents.

The survey suggests that Karlsfeld, a suburb of Munich with a population of 22,000 (in Dachau county) has surpassed the state capital with the highest rent average in Germany, a rank that Munich had held since 1998. In Karlsfeld, the net rent for a 65 square-metre apartment in a fair location of medium amenity is said to be 10.62 euros now, whereas the going rate in Munich proper is 10.45 euros.5