German Property Market stable, says Global Property Guide

We mentioned in our entry of 22 February that the German property market seems pretty unimpressed by the International financial crisis. Just yesterday we received an email from Global Property Guide – which is a company completely independent from ours – stating that the German property market is doing well despite the crisis.

Here is the quote (with kind permission of www.globalpropertyguide.com)

(Excerpts)

„Germany remains the world’s most stable housing market. Prices moved little in 2008, despite the slumping economy. Yet there’s actually some good news…..

The average price of owner-occupied flats in Germany in 2008 was €2,257 per sq. m., an increase of 1.2% on a year earlier. …

The average price of newly built detached houses was €235,000 in December 2008,…up by 5.9% from a year earlier…..

Most Germans live in rented accommodation. Although the proportion of renters to total households slightly slid from 58% in 1990, to 55% in 2004, this rate is still among the highest in the world. Private landlords own about 46% of the housing stock, social housing is around 6%, and co-operative rentals are around 6%…..

Monthly rents rose an average of 3.2% in 2008 on new contracts, to €7.65 per sq. m., while existing contract rents rose 3%, to €6.44 per sqm…..

In Berlin, rental yields for 30 – 60 sq. m. flats range from 5.4% – 6%, while bigger units (90 sq. m. – 250 sq. m.) have yields of 4.3% to 4.8%. In Frankfurt, rental yields for small units are at 5.6% – 6.6%, higher compared with bigger units, at 4.6% – 4.7%.

While this is good news, Germany’s property market has performed unimpressively from the mid-1990s to the mid-2000s, when most European countries were experiencing housing booms. …”

We recommend to read the full article here:

http://www.globalpropertyguide.com/Europe/Germany/

We can add some more facts: The number of newly built units in Germany  is decreasing since many years. Whilst the estimated demand is around 300.000 units per year, the newly built figure is under 180.000. The demand for single household flats is increasing with a larger demand for space. The average, well renovated or modernized apartment in a central location or well connected by public transport is high, especially in and near the areas where the most jobs exist, naturally – that has nothing to do with the financial crisis.

Unemployment figures have gone up in the consequence of the financial crisis, but unemployed or not – people still need to live somewhere. So they may move to smaller units, but these still must be available, as well as the larger ones being sought-after. Highest demand is per our rental experience for 2-3 bedroom apartments with sizes of 60-100 sqm, and for large apartments over 140 sqm with 4 and more bedrooms. And especially in Frankfurt we notice a high high demand for units up to 700 € rent warm a month.

One has to take into consideration also the fact that in Germany rents and utilties are calculated by square meters, not by number of bedrooms like in many other countries. That means, an apartment with 90 sqm but only one bedroom will have less demand than one with 60 sqm, as the rent for the 90 sqm would be 25-30% higher. Or the landlord must come down a lot below its market value to be in competition with the smaller unit. People are trying to save unnecessary costs and expenses these days.

What has indeed changed due to the financial crisis is the furnished apartment rental market. The demand now is either for very posh, new, attractive and expensive or for ordinary and low price units. Anything with stale and unattractive furniture shows quite some drops in price compared to three years ago.