Status: 06.11.2021 9:51 a.m.
Unaffordable rents and house prices in metropolises like Munich, Frankfurt or Berlin make many people move to the suburbs. But the real estate boom and home office trend are causing prices to rise here too.
The Brühl broker Katharina Kurth is sometimes amazed by the price development on the real estate market. In 2014 she and her company Fairhouse Immobilien sold a single-family home in the city of Brühl, in the suburb of Cologne, for 250,000 euros. This year it was resold for 420,000 euros.
Real estate prices have exploded – also in the outskirts of the big cities. The broker’s experience has also made the bacon belt more popular due to the corona pandemic. Home office regulations remain in place to this day, as the garden is often worth more than the short commute to work. However, this does not apply to all areas. “Only certain districts in the suburbs or even streets are affected by the sharp rise in prices. Here, this only applies to owner-occupied properties,” said Katharina Kurth. “Investors, on the other hand, tend to be cautious in the suburbs and are not – as in the big cities – willing to pay more than 30 times the annual rental income for real estate.”
Desire for your own garden
The real estate portal immowelt.de publishes its price compass once a quarter. It shows the development of purchase prices for condominiums in the 14 major German cities with more than 500,000 inhabitants. Jan-Carl Mehles, Group Leader Market Research & Public Relations at immowelt.de, sees a demand for houses that is currently higher than seldom before – also in the surrounding area. He also sees the corona crisis as a reason. “The desire for enough space and a garden of their own has grown among many Germans. That has pushed prices up even further.”
In Munich, for example, home buyers would now have to pay an average of 1.35 million euros. “In the past three years alone, prices have risen by 23 percent,” said Mehles. A look into the bacon belt could still be financially worthwhile. Here the land prices are often even cheaper than in the city. “However, due to the high prices in the cities, the surrounding area has increasingly become the focus of house buyers in recent years. The result is that there are already surrounding communities around Munich or Frankfurt that are more expensive than the cities themselves.” According to the price compass, the nine most expensive urban and rural districts in Germany are all in Upper Bavaria and therefore close to Munich. The most expensive property to buy is in the Miesbach district, where property buyers have to pay an average of 1.45 million euros for a house.
Except in Upper Bavaria, interested parties can expect high prices, especially in the cities of Baden-Württemberg – in Stuttgart and Heidelberg with almost 900,000 euros each. “A different picture emerges in rural regions in eastern Germany, where the asking prices are sometimes less than 100,000 euros. In this price range, however, houses are often in need of renovation. Buyers therefore often have to reckon with additional costs for extensive renovations,” said Mehles.
Cheap loans, increased construction costs
The Real Estate Association Germany has also found that many interested parties move from the large metropolises to the surrounding area. “Homeownership in the surrounding area is more affordable for many families, especially in view of the favorable financing conditions. Those who want to buy cheaply will find many good opportunities in the surrounding areas of the metropolises,” says the President of the Real Estate Association, Jürgen Michael Schick.
In small towns with 5,000 to 20,000 inhabitants around metropolises, the prices for residential property have only now exceeded the level of the year 2000 again. The enormous price increases in recent years are closely related to the extremely high demand for real estate. This was triggered by the persistent low interest rate phase: there are good conditions for building loans for owner-occupiers.
“Another price-driving factor is the high construction costs,” says Jan-Carl Mehles from immowelt.de. “Due to the shortage of raw materials, the prices for building materials such as wood or insulation material have recently skyrocketed. The costs for craftsmen have also risen due to the high demand and the shortage of skilled workers.”
Moving further to the country?
He expects the price increases to continue in the years to come. “In the bacon belts in particular, we expect further price increases as a result of the corona pandemic. As our analysis together with the Ifo Institute shows, restrictions and lockdowns have fueled the desire of many city dwellers to move out of the city in the near future. Suburbs and smaller cities are particularly in demand, “said Mehles. However, potential homebuyers should not give up hope. “Because interest rates will probably remain low for a while, so that even higher purchase prices can be financed. The risk here remains manageable, as there is likely to be future increases in value for houses.”
The Brühl broker Katharina Kurth sees the difficult situation. “The only perspective for people who are currently looking for a home and who cannot or do not want to afford the prices in the big cities and the suburbs is to move even further into the country.” After all, the chances are not bad that they might benefit from a real estate boom here in the future as well.