A body representing the property industry in Germany, Der Zentrale Immobilien Ausschuss e.V. (ZIA) has on 16.02.2016 issued its new year report on the market. Some of its findings are:
In Germany’s top 7 cities, residential property prices and rents are increasing significantly while in other regions they are stagnating or even decreasing, such as in parts of east Germany. The rise in sales prices has generally been more pronounced than in rents, while those cities considered attractive for young people have experienced the largest increases in both.
Source – Der Zentrale Immobilien Ausschuss e.V, February 2016
The above increases occurred despite a significant increase in building activity in these cities compared to five years previously. In all seven cities, residential space designated as ‘empty’ is under 2%, in some cases under 1%. The report points to a degree of uncertainty in the likelihood of these trends continuing against a background of increasing new building activity. Under normal circumstances the rates of increase would fall or in some cases even stagnate; however, the impact of the very large inward refugee migration – whose needs it is assumed will be met primarily by social housing – cannot at this stage be readily predicted. The ripple effect of that migration however, as refugees access the more conventional rental market over time, will lead to a continuing upward trend in rents, the authors conclude.
For the sixth consecutive year transaction volume in the commercial sector has risen in 2015 to €55 bill. an increase of 37% compared to 2014. Major contributory factors have been low interest rates and the perception of Germany as a safe haven for investors.
Transaction volume in the office sector (2015 – €26.1 bill.), which represents 47% of the total investment in property, increased by 50% or €8.7 bill. compared to 2014. Increased employment in all the major conurbations, as well as and migration of highly qualified workers from other regions, lead to an increase in office transaction volumes in recent years.
Office rents remained largely constant in the main cities, except Berlin and in Munich were they increased by 4.4% and 1.8% respectively. Net (initial) rent fell in Class A (to 4.2%) , B (5.4%) and C (5.9%) areas . Sale prices increased considerably – the average price increases were Class A – 12.2%, class B – 7.7%, Class C- 6.3%.
Logistics and Hotels
Figures for transactions in the logistics sector are not yet fully available but the indications are that a broadly similar picture to 2014 will emerge. Transaction volumes then broke a new record at €2.7 bill. representing 7% of the value of all commercial property transactions.
Hotels continued to be attractive for investors in 2015, reaching a new transaction volume record in 2015 of €3.5 bill. The growth is largely due to an increase in tourism and the addition of new capacity.
Against a favourable economic background, consumer sentiment remained positive in 2015. The main growth is in online business, where turnover grew by 12.7% and now comprises 9.4% of all retail sales. Rented retail space declined for the third year in succession.
The value of retail property sales reached the record level of 2006 at €18.1 bill., the sale of 43 Galeria Kaufof shops contributing to that. Demand from international investors remains high. Yields on high street properties in the seven top cities fell to 3.9%.
Berlin – rents remained largely stable, except in the smaller retail outlets where increased demand in the best areas had an impact.
Hamburg – a similar situation to Berlin, city rents for smaller spaces increased by 6.7%.
Munich – rents increased by between 2% and over 4% against a backdrop of increasing prices and strong demand.
Frankfurt a.M. – the opening of new outlets in the city have led to increased rents.