Experts from the German Economic Institute have examined purchase and rental prices for real estate across Germany. The analysis shows where investments in the housing market are still attractive.
Real estate appears to have become less attractive as an investment, especially in metropolitan areas. However, there are certainly regions in Germany where buying property can be worthwhile as an investment. This emerges from a new study by the German Economic Institute (IW).
The IW analyzed the development of purchase and rental prices in 70 major German cities. The rental offers for apartments, purchase offers for apartments and purchase offers for one- and two-family houses were considered in the period from 2015 to the third quarter of 2023. Using the data on rental and purchase prices, the experts created groups – so-called “clubs” – of cities.
Where rents rise faster than purchase prices
The “clubs” can give buyers information about where the housing market is still attractive. Particularly noteworthy are regions where rents rise faster than purchase prices. From the experts’ perspective, these can be particularly exciting for investors. These include the IW economists in Fürth, Leverkusen and Oldenburg. Here “a subsequent increase in purchase prices can be expected”.
In some regions, the trend is now exactly the opposite: in cities like Halle, purchase prices are currently rising faster than rents. The IW analysts conclude that there are already active investors there who expect the city to continue to grow in the future and become more economically attractive.
At the same time, the analysis shows that rents and purchase prices have recently risen significantly, not only in the seven large German metropolitan regions. According to the researchers, it can also be observed in cities such as Rostock, Lübeck, Mainz and Heilbronn that rising rents and purchase prices are increasingly becoming a burden for those looking for an apartment. “But it should also be noted that these developments are an expression of increasing economic attractiveness,” emphasize the IW experts.
Munich and Chemnitz are particularly noticeable
The economic attractiveness also influences the rental and purchase levels in Bavaria’s capital Munich. The city occupies a prominent position in the analysis: “Munich’s purchase price level is significantly higher than that in other cities,” emphasize the experts. “The high rents and purchase prices can be interpreted as the result of a strong economic location and the concentration of high wealth.”
The trend in Chemnitz is the opposite. The Saxon city has “particularly below-average values,” which is quite surprising from the experts’ point of view. “In fact, the development of Chemnitz can be surprising given the overall good development in Saxony.” Apparently there is an undervaluation of the location in Chemnitz in particular.