Market Report on Residential Property in Germany: Prices reach record levels

In its latest “Market Report for Residential Property in Germany”, Engel & Völkers examines market and price developments in 61 selected cities, as well as the transaction volume in 2018. 

Strong demand on Germany’s residential property market continues to push prices for houses and apartments up and up. In the first half-year of 2018, prices for detached and semi-detached houses rose by approximately 12.5 percent on average over the previous year. This marks an even higher growth than the market segment for freehold apartments (+11.5 percent). “The largest rent and price increases for 2020 can be expected in major cities and the surrounding regions, since the current level of new construction will not meet the actual need for housing,” predicts Kai Enders, Member of the Board of Engel & Völkers AG, adding: “A lack of investment alternatives, together with the low level of interest rates and the strong influx of people wanting to live in urban centres, means that real estate will remain a worthwhile investment with attractive returns in the future.” 

Prices at an all-time high: Asset building with real estate

In the segment for freehold apartments, the Bavarian state capital Munich recorded the highest average prices per square metre in the first half of 2019, at 8,291 euros. In the segment for detached and semi-detached houses, the city of Starnberg leads the ranking of all cities surveyed, with an average asking price of 1.92 million euros, followed by Munich at 1.42 million euros. “Despite these rising prices, the level of demand will continue unabated. Hardly any other investment offers such a high value retention and security in the long term as properties in prime locations,” says Daniela Löchner, Head of Residential for the D-A-CH region at Engel & Völkers.

Transaction volume for houses in 2018: Excess demand leads to record revenues

As in the previous year, Hamburg once again leads the ranking table for turnover on the market for houses, at 1.84 billion euros. With a transaction volume of 1.34 billion euros, Berlin ranks second ahead of Munich (1.28 billion euros). Transaction volumes in university cities such as Münster, Brunswick and Jena have risen by more than 50 percent. The city of Ingolstadt witnessed a tangible 130 percent rise in the number of detached and semi-detached houses that changed hands in this centre for industry last year – marking the highest rise in the whole of Germany.  

Transaction volume for apartments in 2018: Surrounding areas profit from urban boom

At 6.05 billion euros, the German capital Berlin defended its top position from the previous year in the ranking for the transaction volume of freehold apartments. It is followed by Munich at 4.76 billion euros and Hamburg at 2.73 billion euros. Together with Frankfurt, Cologne, Stuttgart and Düsseldorf, these seven cities account for more than a quarter of the total turnover generated on Germany’s market for freehold apartments. 

The good infrastructure, combined with a diverse range of opportunities in terms of work,  education and leisure, make these major cities desirable residential locations with a high quality of life to offer. “However, due to the limited availability of properties and high apartment prices in the Top 7 cities, prospective buyers are increasingly turning their attention to smaller towns and nearby regions in the greater metropolitan areas,” says Daniela Löchner. 

Cities such as Potsdam, Ingolstadt and Halle saw an increase in transaction volume of more than 30 percent compared to the previous year. Starnberg, close to Munich, achieved the highest growth in transaction volume in Germany, with a 64 percent increase in the number of sales recorded.

Outlook: Home ownership ratio holds potential for development

Looking at the home ownership ratio in Germany (47.5 percent), there is still considerable upward potential compared to other countries (average residential ownership ratio in Europe: approx. 70 percent). In particular, good and average locations outside of the main metropolitan regions offer attractive investment opportunities, as the growth in prices here has not yet been exhausted. “For the general population, acquiring residential property is a key factor when it comes to asset accumulation and retirement provision. The positive situation on the employment market and the current low rate of interest are creating ideal conditions for financing properties.  Now is therefore the ideal time to buy real estate,” Kai Enders recommends.

This is the seventh time that Engel & Völkers has published its “Market Report for Residential Property in Germany”. It also contains in-depth analysis on current issues including new construction activity and liveable cities, in addition to a comparison of costs involved in buying or renting. It is now available for the first time as an interactive website (in German):