German Real Estate Current Situation

German Real Estate Current Situation

The tendency to rise and fall in prices in the German real estate market has a certain cyclical nature. There is an approximately seven-year price increase cycle, then its decline occurs, and then the curve creeps up again.

What Awaits Us in the Germany Real Estate Market in the Near Future?

German property prices have risen over the past eight years. At this stage, the price boom in Germany should stop. The tendency to reduce prices may affect many regions of the country; in large cities, this effect will be especially noticeable.

According to experts of the Real Estate Committee of Germany, in Berlin, Munich, and Stuttgart, the value of real estate may drop by a quarter or even a third over the next five years. The prospects in Hamburg, Cologne, and Düsseldorf are ambiguous, but they also tend to lower prices. The real estate market of Frankfurt will be greatly influenced by Brexit.

This will automatically affect rental housing. It is expected that the rental market will at least stabilize prices. This trend is heterogeneous and depends on the region.

Here are two more obvious prerequisites for lower prices:

  1. Rental prices are rising much more slowly than the prices of real estate purchase. Since 2009, the cost of rental rates in Germany has increased by 26%, and the prices for the purchase of real estate in the same period – by 61%. For example, In Munich, purchase prices jumped for 143%, and rents only for 43%. These inconsistencies indicate that a real estate bubble already exists. All this heralds the end of the price boom in the very near future: the greater the price gap between rent and purchase, the less expedient is the acquisition of such objects for investors.
  2. Cities like Berlin and Munich are becoming less and less accessible to local youth. The catchphrase “Berlin is poor but sexy” has sounded different this year. “Berlin is still sexy, but no longer poor,” experts noted with irony. Young people, in general, have small incomes and are particularly sensitive to the rising cost of living and rent. They are attracted by Leipzig and cities like Augsburg and Passau.

The report of the Real Estate Committee of Germany at the beginning of 2018 published a dozen cities that have the best dynamics of development and prospects for investment until 2030.  According to experts, these are university cities: Konstanz, Tübingen, Flensburg, Fulda, and Bayreuth, as well as the cities of Norderstedt, Merbush, Speyer, Rheine, and Nordhorn.

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