Residential real estate is as popular as ever. Many people fulfill their dream of owning their own home with a one- or two-family house or a condominium. High demand is driving real estate prices to infinity. The problem of housing shortages is on the rise. Forecasting future prices is not that easy. Rents could rise even further due to excess demand. Many are therefore looking for alternatives. These include buying condominiums or single-family homes.
The average asking price for a condominium in Germany was €3,748 per square meter in the first half of 2021. This represents an increase of 15.1 percent compared with the first half of 2020. In previous years, the annual increase had still been around ten percent. One- and two-family houses and terraced houses were offered for an average of 350,000 euros, representing an increase of 12.9 percent.
However, this does not apply equally to all of Germany. There are significant regional differences. The best example here is eastern Germany, which is still considerably cheaper than western Germany. It doesn’t matter whether we’re talking about condominiums and single-family homes or rental apartments. This is particularly evident in large cities and metropolitan areas, and also extends to small towns and regions of tourist interest. Very popular investment objects are now vacation homes, which can be used well for their own vacations, but also to bring in tenant profits.
In some cities in Germany, real estate prices have been rising particularly sharply for about five years. These cities include Lübeck, where it doubled during this period. There were also increases in price development of over 85 percent in Hildesheim, Leipzig and Kiel. At 9,429 euros/m², Munich remains by far the most expensive city in Germany. Frankfurt am Main and Hamburg follow at a considerable distance. The high level of trading activity nationwide can be attributed to an increased willingness to buy, which in turn is partly a result of the further drop in interest rates and the building subsidy for children. The increase in construction activity in recent years has led to a rise in the number of first-time sales of newly built apartments in particular.
According to forecasts, high construction costs will continue to ensure that new real estate comes onto the market only slowly in the coming months, which means that demand in many cities will continue to be insufficiently met. Combined with the high rate of inflation, further price increases can be expected in cities where demand is high. As demand continues to rise in the surrounding areas of major cities and metropolitan regions, the highest price increases are likely to be seen here.
Young families in particular are increasingly drawn to the outskirts of the city to a house with a garden. Due to the high price level of some cities, the search radius around them is increasing. The frequent opportunity to work from home means that more and more people are considering locations further away. Larger living spaces are in demand in cities, a trend that developed during the lockdowns. Buyers are placing an even higher value on appropriate living quality. A balcony is also now a high priority for many apartment seekers.
With an annual increase of 15,000 people since 2011, Frankfurt is growing rapidly: in 2016, 729,624 citizens were registered in the metropolis on the Main.
Even though Frankfurt is currently one of Germany’s strongholds for singles, with 53.2 % of households consisting of one person, their number will not increase further, but will decrease by 0.6 % by 2030, demographic researchers estimate. By contrast, the number of two-person households will rise by 7.6% from the current level of around 91,000 to just under 98,000, and the number of households with three or more persons will increase by 6.2% from the current level of 81,000 to 86,000. Scientists see the reason for this development in the change in the composition of the age structure by 2030, according to which young people, in particular, will move to Frankfurt, who will, in turn, start families and therefore form larger households. With a gross domestic product per capita of 98,000 euros, Frankfurt is the economically strongest German city.
Currently, Frankfurt is also shining with superlatives in the real estate sector: the tallest office towers, the fanciest residential high-rises, the most expensive city penthouse. The fact is that the city is working on 32 urban development projects up to 2030 and is using this opportunity to become a sustainable metropolis of the 21st century. The focus is particularly on residential construction in order to be able to offer a wide range of housing types and options to the approximately 100,000 new citizens moving in over the next few years. The approximately 300 vacant office buildings pose an additional challenge, and a feasibility study has been prepared specifically for their conversion into residential buildings.
Between Roßmarkt, Main Tower and Commerzbank Tower, 600 apartments, 60,000 m² of modern office space as well as hotels, restaurants and retail will be built according to plans by the Amsterdam-based architectural firm UN Studio.
In addition to the city centre, Sachsenhausen is also one of the highly sought-after locations, especially loved by young people because of its lively atmosphere. Cafés, galleries, owner-operated shops and designer boutiques line up between Schweizer Platz and Brückenstrasse. Recently, numerous upscale to luxurious new condominiums have been built here, including “Green Life City Frankfurt” and “Grethenweg”. Those who want to live here must calculate with purchase prices that average €5,117/m².
The growing city of Frankfurt still has a lot of plans: For example, the 2015 residential land development program recorded a total of 44 areas with potential for residential construction, most of which will be ready for construction in 5 or 10 years.
The mobilization of building land for residential construction remains a challenge, as the upcoming construction projects, which will create almost 14,000 residential units by 2020, will not be sufficient to meet demand. Frankfurt is also likely to be characterized by more experimental forms of housing in the future in order to meet the needs of an increasingly diverse metropolitan population.
This article was contributed by Stephanie Friess who interned with us in April of 2022
