Ger­many’s pre­mium market nears sat­u­ra­tion

Financial Mirror (Cyprus) - - FRONT PAGE -

It will soon be­come more dif­fi­cult for de­vel­op­ers and own­ers of high-end real es­tate to find buy­ers or ten­ants for lux­ury apart­ments in prime lo­ca­tions in Ger­many’s largest cities, ac­cord­ing to Die Welt.

Thanks to the low in­ter­est rate cli­mate, there is often lit­tle dif­fer­ence in cost for af­flu­ent house­holds be­tween pay­ing rent and re­pay­ing a mort­gage. The mar­gins for de­vel­op­ers have tra­di­tion­ally been much higher in the pre­mium res­i­den­tial seg­ment.

“Whereas pre­vi­ously pe­riph­eral dis­tricts have largely been ig­nored, in­vestors are now turn­ing their fo­cus in­creas­ingly to the ar­eas around the big­gest cities,” said Samira Akhlaghi from CD Deutsche Ei­gen­heim.

In re­sponse to ever-in­creas­ing prop­erty and rental prices, more and more fam­i­lies are mov­ing to the sub­urbs and ex­urbs, a trend con­firmed by the lat­est fig­ures from the Fed­eral Of­fice of Statis­tics and state sta­tis­ti­cal agen­cies.

“It is typ­i­cally pro­fes­sional, af­flu­ent house­holds, i.e. cou­ples in their 40s with chil­dren, who are in­creas­ingly buy­ing houses in the sub­urbs,” ex­plained Michael Stu­ber from CD Deutsche Ei­gen­heim. The big­gest ben­e­fi­cia­ries are small towns and com­mu­ni­ties within easy com­mut­ing dis­tance of metropoli­tan cen­tres.

Of­fice prop­er­ties are among the best in­vest­ment ob­jects on Ger­many’s real es­tate market. Ac­cord­ing to a new CBRE study, roughly EUR 7.6 bln was in­vested in the of­fice sec­tor dur­ing H1 2016, which rep­re­sents 42% of to­tal in­vest­ment in com­mer­cial real es­tate.

“The rental mar­kets in Ger­many’s five largest of­fice cen­tres – Ber­lin, Düs­sel­dorf, Frank­furt, Ham­burg and Mu­nich – re­main highly dy­namic. In H1 of this year, these five cities regis­tered of­fice space take-up of around 1.5 mil­lion square me­tres, which is al­most 14% higher than the same pe­riod last year,” said CBRE’s Carsten Ape. In panEuro­pean com­par­i­son, Ger­many is the sec­ond largest in­vest­ment market af­ter Great Bri­tain, and clearly ben­e­fits from its rep­u­ta­tion as one of the safest and most sta­ble in­vest­ment havens in the world, said Fabian Klein from CBRE.

As re­ported by the Sud­deutsche Zeitung, de­mand for of­fice space in Ber­lin is cur­rently run­ning higher than ever, and not enough new space is be­ing de­vel­oped.

A new bul­wiengesa study, “Market Forecast 2020 – Ber­lin’s Fu­ture Of­fice Users,” de­tails how super-low va­cancy rates of 3.5%, his­tor­i­cally low of­fice space com­ple­tion rates and strong growth in of­fice em­ploy­ment will all com­bine to de­liver above-av­er­age rental price growth in the sec­tor.

The strong and sus­tained de­mand is cred­ited to the city’s struc­tural eco­nomic evo­lu­tion over the past five to ten years, com­bined with a rise in Ber­lin’s pop­u­lar­ity world­wide. High tourist vol­umes, Ber­lin’s cul­tural at­trac­tive­ness and in­creased do­mes­tic and in­ter­na­tional mi­gra­tion have all con­trib­uted to eco­nomic sta­bil­ity in Ger­many’s cap­i­tal. If it wants to sat­isfy de­mand, at­tract would-be ten­ants in the long-term and en­cour­age con­tin­ued em­ploy­ment growth, Ber­lin will need to ap­prove moder­ately denser ur­ban de­vel­op­ment and strengthen its IT in­fra­struc­ture.

Frank­furt’s res­i­den­tial real es­tate market is ex­pe­ri­enc­ing par­tic­u­larly strong growth. The city is not only ben­e­fit­ting from the gen­er­ally favourable con­di­tions that ap­ply to all of Ger­many’s Top Seven cities, it also prof­its from its sta­tus as a global fi­nan­cial cen­tre. With 215 banks and in­sur­ance com­pa­nies, Frank­furt gen­er­ates a per capita GDP that is more than twice as high as Hesse’s state av­er­age.

“Frank­furt’s res­i­den­tial market is with­out a doubt one of the most highly con­tested mar­kets in the whole of Ger­many,” said Man­fred Bins­feld from Feri Euro Rat­ing, who iden­ti­fied strong lev­els of in­ward mi­gra­tion as one of the ma­jor driv­ers of hous­ing com­pe­ti­tion.

The real es­tate in­dus­try is re­spond­ing and there are a sig­nif­i­cant num­ber of new res­i­den­tial de­vel­op­ments cur­rently un­der con­struc­tion. One of the most pres­ti­gious is the “Grand Tower,” which is be­ing de­vel­oped by Za­bel Prop­erty and in­cludes 400 high-end apart­ments, a res­i­dents’ sun deck at 145 me­tres above street-level, and a range of sup­ple­men­tary ser­vices.

Fi­nally, ac­cord­ing to an anal­y­sis car­ried out by the Moses Men­delssohn In­sti­tute and the apart­ment list­ing por­tal WGGe­, rental prices for a room in a shared apart­ment in one of the Ger­many univer­sity towns or cities with more than 5,000 stu­dents have risen sig­nif­i­cantly at the start of the new win­ter se­mes­ter, in­creas­ing from EUR 300 to EUR 349 per month. The most ex­pen­sive rooms in shared stu­dent apart­ments are in Mu­nich (EUR 560), fol­lowed by Frank­furt (EUR 460), Ham­burg (EUR 430), Stuttgart (EUR 425) and Ber­lin (EUR 420). Other towns and cities that have seen sub­stan­tial rental price in­creases re­cently in­clude Freiburg, Darm­stadt, Constance and Dus­sel­dorf.

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