By Sara Seddon Kilbinger
Rising credit interest rates, supply chain issues and skyrocketing construction costs are taking their toll on the luxury apartment segment of the market in some German cities, although, in others, demand has never been higher.
In cities such as Munich, Berlin, Düsseldorf, Frankfurt and Hamburg, rapidly rising prices over the past five years are starting to take their toll, according to a study by ImmoScout24, as more apartments hit the €10,000 per square metre mark, a figure that few are able – or willing – to pay.
According to ImmoScout24, demand - measured in contact requests per week - has fallen by an average of 73% in Düsseldorf, 46% in Cologne, 44% in Frankfurt and 26% in Hamburg. Berlin and Munich are the only exceptions. In Berlin, demand has increased by almost 12%, whereas it has broadly doubled in Munich. New luxury apartments in Munich are now selling for around €8,600 per square metre, compared to just under €6,000 per square metre in Berlin.
In addition, rising interest rates are exacerbating the problem. Since the beginning of the year, interest rates for construction loans with a ten-year fixed term have risen to around 2.8%, an increase of 180%. Moreover, many lenders are demanding higher equity capital requirements from buyers when granting loans, making it increasingly difficult to finance a property.
Roots project in Hamburg will become Germany’s tallest wooden high-rise
Nonetheless, there are some striking projects on the cards, including Roots in Hamburg, which, at 65 metres high, will be Germany’s tallest wooden high-rise upon completion in 2024. Designed by Störmer Murphy and Partners, it will comprise 128 apartments over 19 floors. Apartments range from 115 square metres to 127 square metres and cost between €1.13 million and €1.79 million, according to project developer Garbe Immobilien.
The project is tapping into increased interest on the part of homeowners to live in sustainable buildings: “Recent conversations with developers confirm that buyers' interest in the environmental credentials of their new homes began to grow about twelve months ago,” said Liam Bailey, head of research at Knight Frank. From existing properties in major European cities to new projects in emerging neighborhoods worldwide, developers of luxury homes have an advantage in using energy-saving techniques and sustainably produced materials, according to Bailey: “If they have the money, they can make it happen,” he said.
Martin Murphy, an architect at Störmer Murphy and Partners working on the project, is aiming for the platinum eco-label for Roots, for which fifty-five hundred cubic meters of softwood will be used. “There are still misconceptions about wood as a building material," he said, citing fire protection and how such a structure would react if it were to catch fire. A layer of charcoal forms, according to Murphy, which protects the wood underneath, ensuring load-bearing capacity for a sufficiently long time. For sophisticated residential construction, Murphy sees wood - as a renewable resource - as a viable material for the future, although he notes that construction costs on such a project are typically around 8% to 12% higher than in normal construction.
Hamburg has some of the most expensive housing in Europe
Hamburg is home to some of the most expensive properties in Germany, with some selling for as much as €30,000 per square metre, according to brokerage firm Engel & Völkers, compared to €35,000 in Paris and just €9,000 in Italy. The firm, which operates in around 30 countries, reported that it brokered almost twice as many homes in the €5 million to €10 million range than it did in 2020.
However, elsewhere, some projects have not fared as well. One project feeling the pinch is The Porsche Design Tower, a luxury residential tower in Frankfurt's Europaviertel district, which would have featured an elevator in which residents would have been transported to their luxury apartments while sitting in their cars. Project developer Groß & Partner backed out, leaving many to wonder if offices will be built on the spot instead. A Porsche Design Tower with office and hotel space is already being built in Stuttgart.
“The brokerage of luxury properties has become tougher,” said Thomas Beyerle, managing director of Catella Property Valuation, noting that demand for such properties has “reached a plateau”.
