Rental yield atlas highlights student and fast-growing cities

German mortgage finance specialist Baufi24 has published its Mietrenditeatlas with its latest estimates of the gross annual yield on residential real estate investments. The study gives the average annual yield for residential property for every postcode in Germany.

As part of its most recent study, it compares the returns on property in German cities that have at least a 15% student population. The results are quite enlightening.

Performing well are cities like Göttingen, with an average annual yield of 4.43%. Further south, Giessen yields 3.9%, Darmstadt 3.87% and Heidelberg at 3.71%. Other cities scoring well are Aachen (3.60%), Münster (3.46%) and Würzburg (3.32%).

It also breaks down the cities by growth rates. Among the cities with the fastest-growing populations over the last five years, Potsdam heads the list with 4.28% on average, followed by Flensburg at 4.20% and Offenbach am Main at 3.88%.

Among Germany's seven largest cities, average yields in Cologne are 3.63%, followed by Stuttgart at 3.58% and Frankfurt am Main at 3.35%. Düsseldorf and Berlin are yielding 3.21%, with Hamburg at 3.0% and expensive Munich at 2.65%.

Baufi24's director Tomas Peeters points to the low yields in the biggest cities, where prices have risen the fastest. "Typically in Germany you'll get a yield of between 2% and 5%, with anything above 4% being pretty good. Obviously you have to look at the specifics of the individual property", he said. "We're trying to make mortgage financing as easy as possible. This involves making a qualified estimate as to whether it's worth it for an individual to invest in a certain location.”

The Hamburg-based Baufi24 started life in 2006 as search engine for mortgage providers and has been a fully-fledged independent mortgage broker since 2017. For mortgage enquiries it compares offers from 450 financing banks and other lenders on its digital platform, and supports this with 60 franchised branch offices throughout the country. Its LoanLink24 mortgage product is specifically designed for international clients, often expatriates, buying residential property in Germany.

Baufi24 says it increased its mortgage financing volume in 2020 by 110%, its own turnover by 96%, and increased its staff from 20 to 80, while doubling its number of franchisees from 30 to 60. This was largely, as CEO Peeters said, as a result of the noticeable increase in the number of people spurred on by COVID-19 to buy their own home. His company's, and other rivals' growth, is also a function of the retreat from the market of many banks and Sparkassen, leaving the field more open to the new digital mediators.