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News Release


Jones Lang LaSalle Residential City Profiles Update - Further rise in rents and sale prices amid slightly weaker dynamic in the second half of 2012 – investment volume at 5-year high

Press release including charts [PDF]


Frankfurt, 7th March 2013 – Rental and sale prices in the German residential property market* have risen again in 2012; however, dynamic slowed in the second half of the year in most of the cities under review. Rents** rose by between 7% and 9% over the year in Munich, Berlin and Stuttgart. In Hamburg, Dusseldorf, Cologne and Frankfurt rents rose by between 5% and 7% in 2012, and a rise of around 2% was registered in Leipzig. In almost all cities, sale prices for condominiums** rose by more than twice the rate of rents year-on-year, led by Dusseldorf, Berlin and Munich with over 15%. In Hamburg, Frankfurt and Cologne asking prices rose by between 10% and 15%, and in Leipzig and Stuttgart by more than 7%. “Following two very dynamic half years at the end of 2011 and start of 2012,  growth in several markets reduced in the second half of 2012. The exceptions are Munich in terms of both rental and sale prices, as well as sale prices in Dusseldorf. Based on continuing highly positive fundamental data on both the supply and demand sides in the cities researched, it is expected that rental and sale prices will continue to rise over the next few half-years”, says Andrew M. Groom, Head of Valuation & Transaction Advisory Jones Lang LaSalle Germany.

Overview of research results for the individual cities:
Rental price dynamic is highest in Munich and Stuttgart

Munich again confirmed its reputation as Germany’s most expensive residential property market in 2012. At €13.80/m²/month, rental prices reached a new record level. Furthermore, the dynamic in 2012 was the highest of the cities researched at +9.1%. Together with Stuttgart, Munich is the only city in which the rising trend in rents accelerated during the second half of the year, and the gap between these and the other cities widened yet again.
Berlin achieved a notable rise in rents in 2012 of 8.1% to €7.60/m²/month; however, the dynamic in the capital city in the second half of the year had slowed noticeably. A rise of 9.3% was registered over the whole of 2011. “After three years of the highest growth rates, the price rally on the River Spree has taken a breather. The increased housing construction plays no material role in the reduced dynamic because of the high level of inward migration into the capital. It has much more to do with the temporarily weaker trend after the significant growth impulses of the preceding years. Rents will continue to rise at above average levels“, says Roman Heidrich, Head of Residential Valuation Advisory Berlin.
Hamburg has led the way in rental growth since 2009. For the first time since 2009 there has been a noticeable flattening of the rising trend in rents on the River Elbe (+5.0% in 2012 after +7.7% in 2011); however, the current rental level of €10.70/m²/month should also rise again in the coming years. From 2013, there the impact of the significant increase in housing construction will be noticed in the higher price segment.  
Frankfurt is also one of the rental markets which showed reduced price dynamic in the second half of 2012. The annual growth rate remained at 6.5%. The result is a new record rental price level in a market where there continues to be scarce supply (€11.70/m²/month). The city on the River Main still has the second highest rental level in Germany after Munich.
Stuttgart saw a countercyclical further increased rise in rents in the second half of 2012. The favourable economic situation on the River Neckar, with high levels of inward migration, was the reason for a rise in YoY rise in rents to €10.25/m²/month (+ 7.9%). The rise was 3.9% in 2011.
Dusseldorf showed a significant rise in rents of 6.2% to €9.00/m²/month in the second half-year despite weaker dynamic. It now lies at the same level as the asking rent in Cologne (+5.5%).
Leipzig rental market registered the lowest level of rental growth amongst the cities researched (+1.6% to €5.05/m²/month), with increased activity only in a few sought-after locations. 

Munich is the most expensive location for condominiums – highest price rises in Dusseldorf and Berlin 
With an annual price rise of 17.2% (to €4,590/m²), the Bavarian state capital is by far the most expensive German city in which to purchase freehold property. 
Hamburg has now been more expensive than Frankfurt for the second year in succession and has consolidated its position at €3,220/m² (+13.6%), despite a slight cooling off in the second half of 2012. Since 2009, sale prices have risen by €1,200/m², thus by more than one third. The market on the Alster and River Elbe has shown the highest percentage rise in sale prices of all cities researched over this four year period.
Frankfurt saw a reduction in the rising trend in sale prices for condominiums in the second half of the year, but this is still growth of 10.1% year-on-year. Condominiums on the River Main were offered at an average of €3,010/m² at the end of the year. “The decreased dynamic should not be seen as a turning point. Overall the rising trend remains intact, as demand remains higher than the supply of new apartments“, says Sebastian Grimm, Head of Residential Valuation Advisory Frankfurt.
Dusseldorf showed the highest increase in 2012 with an uplift of 21.1% (to €2,420/m²) due to the many housing construction projects. Development activity on the River Rhine is again brisk and should satisfy demand for high specification new housing for the foreseeable future.
Berlin registered a continued high level of purchase price dynamic (+18.3% to €2,370/m² year-on-year) despite the comparably low level of housing construction per inhabitant. The federal capital was overtaken by Dusseldorf at the end of the year, as it had not repeated the price rise trend of the preceding two years. 
Stuttgart saw the lowest level of price rises in 2012 (+7.3%). Apartments in the Swabian city cost €2,360/m² at year-end and thus around the same level as in Berlin.
Cologne showed stagnating prices at year-end at €2,070/m², following a sharp rise in the first half of the year. This corresponds to growth of 9.9% year-on-year. 
Leipzig is the only city researched which has falling prices for condominiums in the second half of the year (-2.5%); however, compared to 2011, this is a significant uplift of +8.7%. At €1,190/m², condominiums in the Saxon city remain at approximately half the level of Berlin and Stuttgart.

Residential investment volume in 2012 at 5-year high 
With a transaction volume*** of €11.1 billion, 2012 marked a new 5-year high in terms of commercially-traded residential portfolios. Some 200,000 apartments changed hands. Compared with the previous year (€6.6 billion), the transaction volume rose by almost 70%, and the number of apartments sold by 30%. Around €5.1 billion was achieved in just five large-scale transactions with over 10,000 apartments each. The DKB Immobilien AG portfolio (25,000 apartments), the BauBeCon portfolio (23,500), the “Hawk” portfolio (21,600), the LBBW residential portfolio (21,500) and the TLG apartments (11,500) all have new owners. The large portfolio sizes meant the average transaction volume of existing property was €38 million and thus some €15 million more than in the previous year. The average price per existing apartment was around €52,000 i.e. €810/m². Excluding the high-quality LBBW residential portfolio, which sold for just under €1,000/m² or €66,000 /residential unit, the average sale price was around €790/m² or €50,600/residential unit.
The year 2013 started promisingly for the residential portfolio transaction market. The successful floatation of LEG NRW, one of the largest German housing companies, brought the owners Whitehall Fands & Perry Luxco over €1.3 billion. Furthermore, the sale of 92% of the shares of Bayern LB to GBW AG comprising 32,500 apartments in Bavaria should be concluded in the spring. For the second half of the year, there is a planned flotation by Deutsche Annington, the second most important company in the housing industry. 
A potential transaction volume of over €8 billion is forecast for 2013. “Demand for residential property investments with a predictable cashflow remains high; however, the increased prices naturally mean more precise investment appraisals. Nonetheless, the consolidation of the market progresses and further capital market transactions (e.g. IPOs) and large-scale portfolio transactions are to be expected in 2013. There is potential for a transaction volume of around €10 billion for the full year”, says Andrew M. Groom.

* For the tenth time, Jones Lang LaSalle has engaged independent research on the developments in Berlin, Hamburg, Munich, Frankfurt, Dusseldorf, Cologne, Stuttgart and Leipzig. A total of 210,000 rental offers and 95,000 offers of condominiums for sale were analysed. The presentation of the statistics analysed is based on city districts, divided into building age categories and apartment sizes. Further detailed analyses are available for the period from 2004.
** Note: rental and sale prices describe the median, i.e. 50% of the values for a city lie above the value and 50% below. 
*** Asset and share deals with a minimum of 10 residential units and 75% residential use.