Rising German student numbers adding to housing pressure

House prices in Germany's leading university cities are coming under pressure not least from the rising numbers of students in the country's centres of learning, according to a new report by Berlin-based property developer GBI AG.

For the coming winter 2015/16, a total of 2.7 million students are registered, a rise of 2.2% on 2014/15, based on figures from the German Federal Office of Statistics. This is helping to push up prices, with cities such as Freiburg, Tübingen, Aachen, Giessen and Marburg particularly affected.

The number of markets defined as "tight" for housing has risen from last year's 32 to 39 this year, with 19 cities having "acute difficulties" in finding adequate accomodation for their student population, a rise from the 13 such cities recorded in previous years.

According to Stefan Brauckmann, the head of research and analysis at GBI AG, "The figures from the Statistics Office show that young people have not been scared off by the scarcity of housing in choosing their university for the 2015/16 winter semester." This is evidenced by the higher-priced university cities such as Hamburg, where a student room in a communal house costs €420 per month, the highest in the country (behind Munich) and €10.00 higher than last year. Nonetheless the number of students registered for the new semester is 2.8% higher than last year.

In Bavaria the price for a room is €405, with Munich costing €510 per month, although the Statistics Office confirms that the number of students in the state is up 2.6% on last year.

In Germany's eastern states, where rents average €260 in the larger states, student numbers fell, especially in Thuringia. Potsdam at €310 is an exception, due to its proximity to Berlin. “The gap between the popularity of universities is widening,” said Brauckmann. Over the past 10 years, North Rhine-Westphalia registered the strongest growth in student numbers, up by 58%, ahead of Saarland (55%) and Hesse (49%).

At present a framework for more student housing development is lacking in most university cities, he said. “Due to building restraints it is cheaper to construct large flats rather than student apartments.”

The GBI study analysed all 87 cities in Germany with universities with more than 5,000 students enrolled, and found that supply for students is especially tight in Munich, Frankfurt, Hamburg, Stuttgart and Cologne. New cities entering the ranks of "difficult" this year are Aachen, Bonn and Düsseldorf.

GBI is a 50/50 joint venture between the Moses Mendelssohn Foundation and the Düsseldorf–based Frankonia Verrmögensverwaltung GmbH. Previous and planned developments include 48 hotels, serviced apartments and student residences with 9,426 rooms and apartments, as well as 246 housing units. The group has invested nearly €1bn, and has 400,000 sqm of gross lettable space under management. Its hotels include economy, budget, design and long-stay projects in cities such as Frankfurt, Berlin, Hamburg and Nuremberg, while its SMARTments brand builds and operates student apartments, serviced apartment and city apartments.

Meanwhile, the Manchester-based student accomodation specialist Crosslane said it plans to boost its German holdings to 10,000 units over the next five years after identifying real potential in the asset class in Germany. It currently has only 500 units in the German market.

With the shortage of small affordable flats in German cities, allied to increasing numbers of foreign students drawn to German universities by very low fees, new Crosslane CEO Matthew Ryall said, "The offer-demand gap makes a strong case for investment into Germany. Investments in student housing assets can achieve attractive, stable yields and reduce portfolio volatility,” he said. “Compared to micro-apartments, student properties are far less susceptible to economic developments.”

Another company beefing up its involvement in the sector is Dutch group Bouwfonds, the real estate subsidiary of Dutch cooperative bank Rabobank. The group's European Student Housing Fund had a final closing this year and is fully syndicated with equity of €240m, of which around €140m has been drawn down. A second student housing fund is planned and Bouwfonds already holds 24 developments worth around €430m, with 6,000 residential units in Germany, France, the Netherlands and the UK.