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News Release

Frankfurt

Highest ever rental price rises in the Big 8 residential markets in 2016


​Press release including charts [PDF]

 

FRANKFURT, 16th January 2017 – 2016 experienced the highest rental price rises observed in the market since JLL’s records began in 2004. The year-on-year* increase in the 8 residential markets** under review (Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart and Leipzig) was just under 8%. The range was between 4% and 12%. Since 2004, rents have risen by between 26% in Cologne and 69% in Berlin.
 
The year-on-year rise in purchase prices across all 8 cities was 10%, which is higher than the rise in rental prices. Purchase prices have risen between 56% (Cologne) and 115% (Berlin) since 2004. Prices in Leipzig rose by just 7% over the same period.

 
Further tension on the rental markets
 
The highest rise in asking rents*** in the second half of 2016 compared to the same period the previous year was around 12% in Berlin, followed by Cologne and Munich (10% each). There was a year-on-year rise of between 6% and 7% in Hamburg, Düsseldorf, Leipzig and Stuttgart. Frankfurt trailed with 4%. “The rental markets in the cities became increasingly tense again during 2016, resulting in record rental price rises. Even the significant growth rates from 2012 were exceeded in several cities”, says Roman Heidrich, JLL’s Team Leader Residential Valuation Advisory Berlin. He continues: “Despite the introduction of the rental price cap, cities such as Munich and Berlin have shown the greatest price rises because of their high population growth rates. The main obstacles preventing the urgently required new-build of residential properties continue to be the inadequate new supply of building land and the typically lengthy planning and building permit processes and development phases.”

 
Just three markets with higher purchase price growth than rental price rises in 2016
 
The greatest rise in asking prices for condominium apartments*** was in Stuttgart with an increase of almost 17% year-on-year. There was also a significant rise in Leipzig (13%), Frankfurt (11%) and Berlin (10%), and prices rose by 8% in Munich and Cologne. There was robust but much weaker purchase price growth in the other cities under review such as Hamburg (6%) and Düsseldorf (5%). “There were just three markets, Stuttgart, Frankfurt and Leipzig, in which purchase prices in 2016 grew faster than rental prices. Nonetheless, the current excess demand and the low level of new-build activity in the major cities under review would suggest that there is unlikely to be a fall in prices, even over the medium-term”, says Sebastian Grimm, JLL’s Team Leader Residential Valuation Advisory Frankfurt. 

 
Overview of analysis results for the individual cities:
 
Highest rental price rise in Berlin to over €10.00/sqm/month for the first time
 
Munich consolidated its status as the most expensive city in which to rent, with a continued high year-on-year growth rate of 9.7%. The average price of a rental apartment was €17.55/sqm/month. The upward trend of the last three years continued in Frankfurt. Rents rose by 4.2% to €13.50/sqm/month, which means that Frankfurt showed the lowest growth rate amongst the eight cities under review for the second time in a row. With a growth rate of 5.9%, rents in Stuttgart rose to €13.05/sqm/month, approaching the price in Frankfurt. After a strong start to the year (H1 2016 compared to H1 2015), rents in Hamburg stagnated at €11.50/sqm/month taking only the second half year into account. The second highest rental price growth in the cities under review was in Cologne with 10% to €11.00/sqm/month. This increases the cathedral city’s lead over Düsseldorf (6.5% to €10.65/sqm/month). The greatest year-on-year rise in asking rents was again in Berlin with 12.3%. For the first time, rental prices rose to above the €10.00 mark, in this case to €10.15/sqm/month. Again, Leipzig showed a comparatively low rental price level of €6.35/sqm/month. The upward trend (+6% year-on-year) appears to have stabilised.
 
Rents in Berlin and Stuttgart have risen year-on-year to a greater degree than in the period H1 2016 - H1 2015. In Berlin, the percentage rise was the highest since 2012, with the result that rental prices in Berlin are fast approaching the level in Cologne and Düsseldorf. In all likelihood, this trend will continue over the next few years. “Berlin’s population has grown by almost 8% since 2010. If the population grows to 4 million by the year 2030 as is currently forecast, this will equate to a further rise of almost 15%. Compared to this, the total stock of apartments grew by less than 2% between 2010 and 2015”, says Heidrich. He continues: “Despite an increase in new-build activity since 2013, the level of construction activity in Berlin has fallen again recently. Many building permits have been obtained strategically for the sole purpose of reselling sites, securing planning consent in an increasingly highly regulated environment. Hamburg is the shining example: the higher level of new-build volume in the Hanseatic city has decelerated the rate of rental price growth.”

 
Condominium apartments in Berlin are now more expensive than in Düsseldorf; the second highest growth rate is in Stuttgart

The highest asking prices for condominium apartments over the second half of 2016 were in Stuttgart, Leipzig and Frankfurt. “Despite the significant increases across all cities, the rise of 10% was the weakest annual growth rate since 2011”, says Grimm.
 
Munich remains, by far, the most expensive city to buy a condominium apartment at €6,580/sqm. There has been a significant price rise of 8.2% year-on-year, however the price rise taking only the second half year of 2016 into account is noticeably weaker than in previous years (1.3%) for the first time since 2011. After very little movement in the previous year, Frankfurt experienced another significant upswing in the condominium apartment market (10.5%) to €4,370/sqm. Recording the highest growth rate of all cities under review of 16.9%, prices in Stuttgart have now overtaken Hamburg. Condominium apartments on the River Neckar now cost €4,050/sqm, compared to €4,020/sqm in Hamburg, despite the latter’s continued year-on-year growth trend of 5.9%. Prices in Berlin overtook Düsseldorf for the first time, increasing by 9.6% to €3,510/sqm. As in the last three years, purchase prices continued to rise in Düsseldorf too, with a year-on-year increase of 5.1% to €3,410/sqm. Taking only the second half year of 2016 into account, prices in Cologne stagnated at around €3,140/sqm, which was another year-on-year plus of almost 8%. There was a stronger rise in prices in Leipzig in the first half of 2016 (8%), but the price rise was weaker in the second six months (5%). This equated to a year-on-year growth of 13.3% to €1,700/sqm. “There is no end in sight for the continued upward trend in purchase prices in 2017. The potential rise in interest rates for construction financing already apparent at the end of 2016 has actually boosted the market over the short-term. However, a slight rise in interest rates is likely to result in just a marginal weakening of the price dynamic in the cities under review. The supply of equity capital for construction financing is still high and demand pressure on the residential markets in the major economic centres continues to increase”, says Sebastian Grimm.


Comments

* Refers to the 12-month period H2 2015 – H2 2016
**JLL’s Residential City Profiles have presented an analysis of the developments in the rental and condominium apartment markets in Berlin, Hamburg, Munich, Frankfurt, Düsseldorf, Cologne, Stuttgart and Leipzig since 2008. They are the result of an analysis of a total of 100,000 rental apartments and 65,000 condominium apartments offered in the market. The presentation of the data analysed extends to the individual submarkets, and is differentiated into building age and apartment size categories. Further detailed analyses for the period since 2004 are available on request.
The Residential City Profiles are available to download from 1st March 2017 on the website http://www.jll.de/germany/de-de/research/wohnen
***Note: asking rents and purchase prices show the median, i.e. 50% of the sample in any city is above this level and 50% is below.