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The Augustusplatz in Leipzig
Leipzig has once again secured the top spot in the latest Risk-Return study by German real estate consultancy Lübke Kelber, marking the city as the undisputed leader among investment locations in Germany. But beneath this predictable headline lies a more significant trend: investors are increasingly turning to mid-sized cities and former industrial centres, particularly in North Rhine-Westphalia’s Ruhr area, attracted by compelling returns and shifting migration patterns.
Leipzig’s continued appeal rests on a combination of stable economic growth, favourable demographics, and comparatively affordable property prices. Mark Holz, head of market analysis at Lübke Kelber, describes Leipzig succinctly: “The overall package is simply right here.” The Saxon city outperforms competitors across all risk categories assessed in the study, making it attractive to both risk-averse and yield-seeking investors.
Yet Leipzig’s appeal aside, the real intrigue lies in the improved prospects of traditionally overlooked cities, notably in the Ruhr region. Essen, Bochum, Dortmund, Duisburg and Gelsenkirchen—all previously considered unattractive—have seen significant upward momentum. Cities such as Aachen and Paderborn have similarly advanced, reflecting a broader trend away from Germany’s largest metropolitan hubs.
Karsten Lieser, Lübke Kelber’s head of investment, explains this shift clearly: “People in Germany are no longer migrating solely to a handful of large conurbations; they are spreading out more evenly across the country.” This trend accelerated during the pandemic, as remote work reshaped commuting norms. Despite pressure from some employers to return staff to the office, flexible working remains entrenched, enabling qualified professionals to choose locations offering better affordability and quality of life.
Intense cost pressures in the biggest cities
The cost pressures in metropolitan regions like Munich and Berlin remain intense. On average, urban tenants now spend over 30% of household income on rent. Data from platforms such as Immobilienscout show commuter-belt communities experiencing near-identical pricing pressures as city centres. Augsburg, benefiting directly from Munich’s spillover effect, exemplifies how second-tier cities with strong transport connections can quickly gain investor favour.
Lübke Kelber’s analysis emphasises that total returns in traditional top-seven metropolitan markets (Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart, Düsseldorf) rarely exceed 6%. Conversely, yields in cities such as Mülheim an der Ruhr begin at 7%, frequently reaching up to 11%. Yet higher returns inherently reflect higher risks, primarily in structurally weaker areas with greater vacancy threats, notes Tomas Peeters, managing director of Baufi24.
Nevertheless, investors increasingly find attractive, risk-adjusted returns in mid-sized markets like Darmstadt, Erlangen, Ulm, Hanau and Mainz, all of which feature prominently in this year’s top twenty. According to Holz, these cities combine economic resilience with more reasonable property pricing.
Capital values expected to rise through 2025
Institutional investors, family offices, and large residential companies are notably returning to multi-family assets as financing conditions improve and interest rates decline. Lieser anticipates capital values could rise by 10–15% in the coming year, driven by tight supply and sustained rental growth.
Holz sees further potential for smaller cities, predicting the current scenario—rising rents and slowly increasing purchase prices—will expand opportunities beyond traditional hotspots. Indeed, ten cities now offer better value for property buyers compared to renting, including Kaiserslautern, Chemnitz and Gelsenkirchen—a marked improvement from last year's solitary example, Dessau-Roßlau.
Lübke Kelber’s rigorous methodology considers population forecasts, socio-economic factors, rental and purchase price trajectories, and qualitative quality-of-life assessments. The study’s recommended minimum returns are adjusted for location-specific risks, factoring a standard equity-to-debt financing ratio (55% equity, 45% debt) and benchmarked against the German ten-year bond rate.
While Leipzig maintains its preeminent status, investors now have a broader set of viable locations offering attractive returns and manageable risks—provided they look beyond Germany’s traditional metropolitan clusters.