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News Release

Frankfurt

Greater correlation between rental and purchase price rises across the residential markets


​News release including charts [PDF]

 

FRANKFURT, 21st July 2017 – In the first half of 2017, the strong rental price growth seen over the past year continued in most of the 8 cities reviewed by JLL (Berlin, Hamburg, Munich, Cologne, Frankfurt, Düsseldorf, Stuttgart and Leipzig)*. The average year -on-year** rise was around 7%. The increases range from less than 1% in Hamburg to 13% in Berlin. Rental price growth since 2004 ranges between 32% in Cologne and 80% in Berlin.
 
The increase in asking prices for condominium apartments across all the cities under review was just under 8%, which is slightly higher than the rise in rental prices. The rise in purchase prices since 2004 has ranged between 10% (Leipzig) and 129% (Berlin).

 
Rental market cycle is accelerating – rents are already rising faster than purchase prices in Munich and Stuttgart
 
The highest rise in asking rents*** in the first half of 2017 compared to the same period last year was in Berlin, with an increase of around 13%, followed by Munich at 11%. Rents rose by 8% in Stuttgart, 9% in Cologne and 6% in Düsseldorf and Leipzig. Growth in Frankfurt was significantly slower, at 3%. Asking rents in Hamburg were almost unchanged. After the strong growth in rental prices had appeared to be slowing down slightly in 2014 and 2015, there were new record levels of rental price growth in 2016 and 2017, primarily in Berlin and Munich. “Despite a slight rise in completion volumes and an increase in rental price regulation, the rate of growth in asking rents is still accelerating, in those two cities in particular” says Roman Heidrich, Team Leader Residential Valuation Advisory JLL Berlin. He continues: “Even if there is no repeat of the high levels of population growth from the last two years, ongoing economic growth is likely to mean a continuation of the inward migration of workers into Germany, and this will result in further increased demand on the rental markets in Germany’s principal economic centres over the medium term.”

 
The greatest increase in asking prices for condominium apartments*** compared to the same period last year was in Berlin, at almost 13%. There was also a double digit rise on the Düsseldorf condominium apartment market, of 10%. There were rises of between 7% and 9% in Hamburg, Frankfurt, Leipzig and Cologne. In Munich und Stuttgart, asking prices rose by 5% and 3% respectively – less than the increase in rents in those cities. “With rents rising faster and reduced purchase price growth, in a number of cities the rates of increase have been at similar levels in the condominium apartment and rental markets. Only in Hamburg and Frankfurt was the rise in purchase prices still above the growth in rents. Rents in those cities are currently growing more slowly than in the other major cities, in part due to the recent increase in new-build activity in the residential rental sector. However, growth remains strong in the condominium apartment markets” says Sebastian Grimm, Team Leader Residential Valuation Advisory JLL Frankfurt.


 
Overview of analysis for individual cities:
 
Highest increase in rents in Berlin since 2004
 
Munich once again consolidated its status as the most expensive city in which to rent, with continued strong year-on-year growth of 10.5%. The average for a rental apartment was €18.70/m²/month. Frankfurt was the second most expensive of the cities under review, with an average asking rent of €13.70/m²/month but, as in previous years, the rise of 3.2% was relatively moderate. There was a significant rise in rents in Stuttgart, of 8.0% to €13.55/m²/month, and on the Hamburg rental market rents almost stagnated at €11.55/m²/month (+0.7%). The third highest increase in rents amongst the cities under review was in Cologne, of 9.3% to €11.50/m²/month, once again ahead of Düsseldorf (+6.2% to €11.00/m²/month). Once more, the greatest hike in asking prices year-on-year was in Berlin, of 12.8%, which is also the biggest annual increase since 2004. Rents rose to €10.80/m²/month and are thus approaching the €11.00 mark. The median rent in the German capital has risen by a good 80% since 2004. Even the 68% growth seen in Munich is nowhere near this level. At €6.55/m²/month, rents are comparatively low in Leipzig, where there is a steady upward trend of 6.0% year-on-year.
 
“Since 2004, rental price growth in Hamburg has been half that in Berlin, due in part to a timely and co-operative residential alliance involving all participating market players. This type of initiative is still a long way off in Berlin. At best, current building permit numbers in 2017 are likely to result in stagnant new-build activity, which means that, despite political attempts to cap rents, they will continue to increase significantly because of the huge demand” says Heidrich. He continues: “The increasing scarcity of development land, lengthy approval processes at the building authorities, increased political requirements relating to the development of social housing and public protests against over-development and new-build make construction more difficult and expensive, and that’s not just confined to Berlin.”


  
Highest growth in purchase prices for condominium apartments also seen in Berlin
 
“After the comparatively weak second half of 2016, growth in purchase prices was stronger across all the major cities in the first half of 2017” says Grimm. In the first half of 2017, the highest percentage growth in purchase prices for condominium apartments was in Berlin, at almost 13%. Munich remains by far the most expensive city in which to buy a condominium apartment, at €6,790/m² – a year-on-year increase of 4.7%, significantly weaker than in the past and continuing the trend from the second half of 2016. Purchase prices in Berlin and Munich are twice as high as in 2004.
 
Frankfurt and Hamburg came second and third, having experienced significant growth in purchase prices, of 8.1% to €4,550/m² and 8.6% to €4,210/m² respectively. In contrast, in Stuttgart the very strong growth rates seen in the last few half years have cooled markedly (2.6% to €4,000/m² compared to H1 2016). This is actually a slight decrease compared to the second half of 2016. Purchase prices in Berlin rose by 12.5% to €3,730/m². There was a further rise of 10.0% in Düsseldorf, where condominium apartments are offered at €3,660/m². There the increase in Cologne was 6.8%, with prices rising to €3,310/m². The upward trend continued in Leipzig, with a rise of 7.6% to €1,750/m².
 
“Despite reports to the contrary in some areas, we still expect that purchase prices on the condominium apartment markets in the Top 8 cities will continue to rise. The low level of new-build activity over the medium, term combined with a high propensity to purchase and strong demand plus the continued favourable financing conditions will result in further increases in purchase prices. However, we expect that purchase prices will rise more slowly than over the past few years and that there will be an even closer correlation between rental price and purchase price growth. There are currently no signs of a price bubble, which could burst and result in a price collapse” says Sebastian Grimm.

 


Notes

* Since 2008, JLL’s Residential City Profiles have presented an analysis of developments in the rental and condominium apartment markets in Berlin, Hamburg, Munich, Frankfurt, Düsseldorf, Cologne, Stuttgart and Leipzig. A total of 90,000 rental apartments and 50,000 condominium apartments offered in the market were analysed. The presentation of the data analysed extends to the individual submarkets, and is broken down into categories according to building age and apartment size. Further detailed analyses for the period since 2004 are available on request.
The Residential City Profiles will be available to download from 24th August 2017 on our website at http://www.jll.de/germany/de-de/research/wohnen

** Refers to the respective 12-month periods (H1 2017 compared to H1 2016)

*** Asking rents and purchase prices are medians, i.e. 50% of the sample in any city is above this level and 50% is below.