Trend shift in migration figures from east to western Germany

A new study produced by Hamburg-based Quantum Immobilien concludes that there has been a trend shift in the eastern German states, and that for the first time since reunification, net migration from the east to the west of the country has now stopped. In fact, says the study, certain eastern German cities have experienced a surge in population that had not been anticipated. This has clear implications for real estate markets, it says.

The study, based on 2012 figures, was produced by Quantum Immobilien for the federal government as part of its “state of reunification” annual study. The Quantum Focus Nr. 12 study demonstrates how clearly the times have now past when young and well-educated east Germany headed en masse for employment in western cities.

Focussing on eastern Germany’s 10 largest cities, the nuanced study deals with the question of residential housing in these cities and to what extent the region has been underestimated by developers. Here the big winners are the university towns, particularly those with strong technnology sectors, whose demographic developments have exceeded even the more optimistic forecasts. These towns’ housing sectors are characterised by low vacancy rates, rising rents and new construction activity.

Rural areas and cities with poor infrastructure and employment and educational opportunities were still seeing major population outflows, putting further pressure on already weak rental markets. According to Quantum, the “main winners” are cities like Leipzig, Potsdam, Jena or Dresden. These four cities and other urban centres with similarly positive “fundamental data” showed “healthy residential market constellations with investment potential”, the researchers noted.

Leaving aside Berlin, investment turnover in the eastern states has risen 38% since 2009 to €9.4bn in the year 2012. While Dresden and Leipzig have profited strongly, so have cities like Erfurt, Rostock and Magdeburg. Dresden topped the list in 2013, with a volume of €393m in multi-family homes traded, fully 44% above its 10-year average. Along with Leipzig, Dresden properties now sell for a multiple of 16-17 times annual ‘cold’ rent (i.e. ex-utilities).

In particular, the researchers conclude, value is to be found in those residential markets where the reduction in the vacancy rate is not yet reflected in rising local rents, or where construction activity is still lagging the level of demand. The full study can be found here.