Steady rise in residential prices despite (or because of) Corona

As we’ve reported elsewhere, Germany’s residential housing market has held up resiliently through the Corona crisis, with the pandemic itself probably helping to spur demand as people reassess their overall living situation. A recent study by online portal immowelt that prices in 75 of Germany’s 81 largest cities rose in value through 2020, in some cases by more than 30%.

The study examined offer prices for owner-occupied apartments (condominiums) of between 40 and 120 sqm (as against confirmed actual prices achieved, for which we refer to other data). Prices rose sharply, with buyers in Munich, the most expensive city, shelling out 8% more for an average of €8,150 per sqm, up from €7,580 the year before. Hamburg too hit a new high, with the average price of €5,270 per sqm up 14% on the previous year.

While prices in Berlin are somewhat lower, nonetheless apartment prices rose 11% to €4,640 per sqm, while the price rally in the capital spilled over into neighbouring Potsdam, which saw a sharp increase of 26%, bringing average prices there at €4,250 to just below the level in Berlin.

According to Prof. Dr. Cai-Nicolas Ziegler, CEO of immowelt, “Compared with other financial investments, the Corona pandemic has shown the property market to be fairly crisis-resistant, with prices holding firm, and in many instances, even rising strongly. These price rises are a function of the high underlying demand for housing, which is still very much in short supply, particularly in the big cities. Corona has not had an affect on this.

Trailing Munich – by a margin – is Frankfurt am Main, the second most expensive city. But it made ground on Munich in 2020, with prices rising by 22% to a sqm price of €5,980 and thus €1,000 more expensive than the year before. This has partly to do with the sheer volume of expensive new-build apartments coming onto the market, but also with the steady demand from employees benefiting from banks’ optimistic outlook that the city will be a beneficiary of the Brexit exodus, and boosting staff numbers.

Stuttgart did not fare as well, rising ‘only’ 11%, but it’s still one of the most expensive cities in the country, with median prices per sqm of €4,800. Further south in the Black Forest, the university city of Freiburg is even more expensive, where at €4,980 per sqm prices are 9% higher than last year, the sort of price rises being seen across a raft of smaller towns across the southern states of Baden-Württemberg and Bavaria. Notably, the Audi.city of Ingolstadt (+5%), Regensburg (+2%), Erlangen (-1%) and Heidelberg (0%) all remain in Germany’s top 15 most expensive cities with prices above the €4,000 mark, without seeing much upward movement in prices last year.

Further north in North-Rhine Westphalia prices are tendentially lower, although there was some catch-up last year. One city, Herne in NRW, jumped a whopping 36% - albeit from a low base. Median prices in NRW per sqm are at €1,540, but big upward moves were seen in Recklinghausen (+23%), Hamm (+22%) and Wuppertal (+21%).

In the eastern cities prices continue their upward march; property in the popular cities of Leipzig (+21%) and Dresden (+18%) are in strong demand – with rising number of inhabitants and thus rising demand for living space. A square meter now costs €2,500 in Leipzig and €2,610 in Dresden. An even greater increase was recorded in Halle an der Saale (+27%), where condominiums now cost €2,240 per sqm, probably as a spillover effect of the rising prices in nearby Leipzig.