by Thomas Beyerle
The German housing markets have now reached the heart of political life. The coalition agreement not only provides for the rent indexes to be standardised or qualified, but also for the “actual tenancies” to be recorded. Nevertheless, the question arises as to how the markets have actually functioned in recent decades?
The fact that new price ceilings have formed in the conflict between urbanisation, scarce building land and high demand is only superficially a simple function. The share of new housing stock in so-called social housing, which has been falling for 25 years, also exacerbates this development – especially for threshold households in Germany. This development is having an impact on local markets: Rising multipliers or falling yields and further rises in rents in conurbations are an expression of very high investment activity – despite increasing social ties in project developments.
In our study, we once again analysed the 80 German residential markets in the “very good residential location” and “medium residential location” categories. The variables “average rents” and “prime yields” provide a very detailed picture of the current positive state of the German housing markets and an ideal overview of the competitive conditions in the markets examined. The 2019 risk-return profile is of particular interest from the investor’s perspective, which you will find visualised in the thematic map.
• The strongest rent increase in the past twelve months occurred in the category “very good residential locations in the seven A-markets” with +6.08%, followed by the category “medium location”, also in the seven A-markets, with +3.68%. On average, the 17 €/sqm limit was exceeded for the first time in these cities in the very good residential locations. There is also no sign of a weakening of rents throughout Germany. In medium-sized locations, the average rent in the nation increased even more rapidly (+3.16%) than a year ago. In the very good locations, the growth rate of +2.97% was only slightly lower than in 2018.
• The leader in average rents in very good residential locations is currently Munich with 22.97 €/sqm – the lowest measured value in this location category is in Remscheid and Herne with 7.23 €/sqm and 7.27 €/sqm respectively.
• With an average prime yield of approx. 4.6%, the compression of yields in Germany has slowed and fell by only 13 basis points in the past 12 months. Nevertheless, there are regional differences, with significantly stronger declines in the A-locations. In this respect, Berlin has replaced the Bavarian state capital and achieved a peak yield of 2.4%. The highest measured value is registered in Herne (7.0%), followed by Cottbus (6.8%) and Remscheid (6.5%).
This Catella analysis provides a basis for an initial overview of the examined locations. It is also clear, however, that the German residential property markets are more heterogeneous than ever before, which is reflected in the current rental and price indices. This applies both to the emergence of new offers in the typology of housing (“residential towers”) and to the changes in the size of the space available (“micro living”). The range of rental data will therefore continue to increase. Against this background, these aspects should also find their way into politically motivated discussions in the future.