In order to put the real estate prices in Munich in perspective, Albert Fittkau, the chairman of the city’s expert committee, brought a few comparisons with other large German cities. Of course, the bar in Munich is always the highest. For a new condominium in a good residential area, for example, it goes up to just over 11,000 euros. The bar for Berlin ends at just under 7000 euros. The ratio for terraced houses is downright insane: for Munich, the bar goes up to almost 1.2 million euros, for Berlin, Hamburg, Cologne, Frankfurt and Stuttgart it is a little over or under 600,000 euros, for Bremen well below. “For four terraced houses in Bremen you get one in Munich,” says municipal officer Kristina Frank.
Fittkau and Frank present the annual report of the expert committee for the year 2021 this Tuesday morning. In addition to many market analyzes by brokerage houses and other companies, this report from the city is the official overview. Because the figures are based on all purchase contracts for real estate and land that are closed in Munich. And they make it clear that the second year of the corona pandemic has in no way dampened the rise in prices. All of the key figures are pointing upwards, many of which are so significant that you could get dizzy – especially when you consider that they come from an extremely high price level, which is a fundamental difference to Berlin.
The most expensive property was a detached house in Nymphenburg for 14.5 million euros
For most people in Munich, the prices for apartments are probably the most relevant. Here, the expert committee for the new building registered an average price increase of 15.1 percent. A 74 square meter apartment in a good residential area costs around 830,000 euros. The expert committee is nice enough to show the highest purchase price of the year for individual categories: A newly built 395 square meter apartment in Bogenhausen went for 10.9 million euros. The most expensive single residential property of the past year was a single-family house in Nymphenburg for 14.5 million euros.
Prices for existing apartments have risen by nine percent. Square meter prices range from 7,900 euros in an average residential area without a listed building to 12,750 euros in a good location with a listed building. These values are also relevant for people for whom buying a home is out of their reach. Because purchase prices also affect rents, even if they have been rising more slowly than purchase prices for years.
All of these numbers raise the question of whether things can go on like this or whether real estate prices in Munich will calm down in view of the uncertain global situation with the war in Ukraine and the significantly increasing interest rates on loans. The brokers’ association IVD announced a trend reversal in a report for the Munich area at the beginning of the week. Albert Fittkau and Kristina Frank do not go that far for the city of Munich. Your official report is only about the previous year, when the world situation was different. And they are cautious with forecasts, speaking of a “look into the crystal ball”, but they make a few cautious assessments.
Frank estimates that the risk of a real estate bubble bursting as a result of the rise in interest rates is low
Fittkau, for example, says that the purchase contracts from January to May 2022 show a “latently increasing level” for semi-detached houses from around 11,500 euros to 13,000 euros per square meter of living space. However, he emphasizes that these are preliminary values. The sharp rise in interest rates, for example, only came in the past few weeks. Interest rates are also less important in Munich for the decision to buy a property than elsewhere, says Frank. “We hear from notaries that the proportion of purchase contracts without a mortgage in Munich is very high.” This means that many people do not need a loan at all. “We have many top earners and many heirs, the equity share is generally high here,” explains Frank.
Frank also sees the risk of a real estate bubble bursting in Munich as a result of the rise in interest rates as low, “because expiring loan agreements for ten years, for example, have been concluded at a similar level to the one we have now.” So if you need a follow-up loan now, you can calculate on a similar basis as before. “But,” adds Frank, “that can of course change if interest rates continue to rise significantly.” But even if a nationwide trend towards falling real estate prices were to emerge, “then,” says Frank, “Munich would be the last to be affected, before that the commuter belt would recede.”