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News Release

Frankfurt

Price boom in the housing markets


Press release including charts

 

FRANKFURT, 4th August 2016 – Rent rises in the housing markets* in the eight cities analysed by JLL (Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Leipzig, Munich and Stuttgart) accelerated further in the first half of 2016. With a 6% rise across all cities in the first six months, this is the strongest rental growth observed over a 12-month period (compared to H1 2015) since analysis began in 2004, and ranged from 4% to 7% in the individual cities. Since 2004, rents in the cities have risen by between 21% (Cologne) and 59% (Berlin). This momentum in the purchase prices for condominium apartments is sustained: the high growth rates of previous half-years were exceeded in six cities. Berlin and Leipzig did not perform to the same level. The rise in purchase prices in the first six months compared to 2004 therefore ranged from 54% (Cologne) to 104% (Berlin), with the exception of Leipzig, where prices increased by a mere 2%. Here, demand has reduced significantly since the initial boom following reunification.
 
The highest rise in asking rents** in the first half of 2016 compared to the corresponding period last year was registered in Düsseldorf at around 8%, followed by Leipzig (7%). In Cologne, Hamburg, Munich, Berlin and Stuttgart, rents rose by between 5% and 6% over the year as a whole. Frankfurt registered the lowest with 4%. "With the exception of Frankfurt and Stuttgart, current trends are being driven by sharp price rises in the new-build segment, which are normally of a higher quality and therefore more expensive than existing apartments", explained Roman Heidrich, Team Leader for JLL Residential Valuation Advisory Berlin. He continued, "Rises in existing rents in the cities investigated were 1% - 3%-points lower, but at 3% - 7%, they were still considerably higher than the previous years’ trends over the year as a whole. There is also no evidence of any effects arising from the implementation of rental price caps in any of the housing markets investigated. Rents continue to increase due to the excess demand, irrespective of the implementation of any misguided control instruments."
 
Asking prices for condominium apartments** have also increased more sharply than before over the last six months. By the mid-point of the year, the greatest increase of over 20% YoY was registered in Leipzig. Stuttgart was not so far behind, registering 17%. Double digit increases in asking prices were also observed in Munich (13%) and Cologne (10%). The rises in Berlin (9%), Frankfurt (6%) and Düsseldorf (5%) were still relatively strong, but were moderate in Hamburg at 2%. ‘Contrary to the rental market, higher price rises for condominium apartments were noted in the market for existing apartments as opposed to the new-build segment in six of the cities analysed’, commented Sebastian Grimm, Team Leader at JLL Residential Valuation Advisory Frankfurt. Grimm continued, "The price gap between the supply of existing and strongly increasing new-build apartments has opened again over the last few years. In some areas, new-build already contributes 40% to the total supply. Prices have reached the level at which potential purchasers start to redirect their attention to existing apartments. The consequence: this segment has also now started to see sharp price rises."

 
An Overview of the Investigative Results for the Individual Cities:
 
High rent rises were noted in all cities analysed in H1 2016
 
Munich remains by far the most expensive city: here, asking rents increased by 6.2% to €16.90 per sqm per month over the year as a whole. There is good news for anyone looking for an apartment in Hesse: despite the noticeable rise of 4.3% to €13.30 per sqm per month, Frankfurt reported the weakest momentum of the cities monitored, but asking prices remained higher than in Stuttgart (€12.55 per sqm per month). Stuttgart’s growth (5.2%) was topped by Hamburg, where rents have now started to rise strongly again following seven half-years of stagnation. They increased by 6.3% to €11.50 per sqm per month over the year as a whole. Prices in Cologne increased to the same degree, their strongest rise since analysis began in 2004. The average asking rent in Cologne of €10.55 per sqm per month is now higher than is quoted in Düsseldorf (€10.35 per sqm per month), despite the latter registering the strongest rise of the cities analysed (7.6%). Asking rents in the federal capital remain comparatively modest. Whilst upward momentum there slowed down somewhat in 2015, analysis for the first half of the year showed growth of 5.4% to €9.55 per sqm per month. In Leipzig, the rise in rents of the past half-years continued: following a significant rise of 6.9% compared to the corresponding period last year, median rents have now reached €6.20 per sqm per month. "Demand is still the principal driver of rents. The volume of new-build space has increased in all of the major cities, but there is a risk that stagnation will set in in some locations, as is suggested by the current number of building permits granted. It will only be possible to counteract further rent rises by increasing the supply of accommodation, despite the fact that this will also bring an additional supply of more expensive rental apartments to the market. However, if people move from existing into new-build apartments, this will release on to the market a stock of apartments in the mid-price bracket", explained Heidrich

 
Condominium apartments in Munich four times more expensive than in Leipzig
 
Prices continue to spiral upwards in all of the markets analysed, with the highest price rises observed in Leipzig, Stuttgart and Munich in the first half of the year. "The upswing in the markets for condominium apartments is unwavering. Price rises are similar to those seen in the boom years 2012 and 2013, driven further upwards by attractive financing options and by demand outweighing supply in the major cities. There are a sufficient number of high income potential purchasers available to offset the increasing suburbanisation driven by prices, and this is what is driving prices up", according to Sebastian Grimm.
 
Anyone wanting to buy an apartment must dig deepest into their pockets in Munich. The average purchase price here is now €6,490 per square metre, which is a rise of 12.5% over the year as a whole. Asking prices in all other cities are far lower than in Munich. Following a brief period of stagnation, prices in Frankfurt have risen by 5.5% to €4,210 per sqm. There has been a much sharper rise in Stuttgart where they increased by 16.8% to €3,900 per sqm. "In the last few years, an above-average increase in population figures and low supply of new-build have led to an average price rise of 15% per annum. Prices for existing apartments have also risen sharply", explained Grimm. A condominium apartment in Hamburg costs an average of €3,880 per sqm. At 2.4%, this is the most moderate rise amongst the eight cities. With a rise of 5.2% over the year as a whole, the upswing of the past few years in Düsseldorf has continued. An average purchase price of €3,320 per sqm must be anticipated in North Rhine-Westphalia’s state capital. For the first time ever, Düsseldorf’s purchase price level has reached the same level as the federal capital, with a rise of 9.9% registered for Berlin. In contrast to the rental apartment market, purchase prices in Cologne remained behind Düsseldorf, despite a rise of 9.3% to €3,100 per sqm. At just over 20%, the highest rise by far amongst the eight cities analysed by JLL was registered in the most inexpensive market, Leipzig, where purchasers were willing to spend an average of €1,620 per sqm on a condominium apartment.

Notes

* In their Residential City Profiles, JLL has analysed trends in the rental and condominium apartment markets in Berlin, Hamburg, Munich, Frankfurt am Main, Düsseldorf, Cologne, Stuttgart and Leipzig since 2008. A total of 110,000 rental offers and 70,000 purchase offers for condominium apartments were analysed. The data factors analysed are presented at city district level and are broken down into building age categories and apartment sizes. Further detailed studies dating from 2004 are available on request.
The Residential City Profiles will be available to download from 24th August 2016 under http://www.jll.de/germany/en-gb/research/residential 

** Note: asking rents and/or purchase prices describe the median, i.e. 50% of the values in a city lie above this value and 50% below.