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German train in the countryside
As interest rates continue to rise and homes in the city centre become increasingly unaffordable, more and more people are flocking to the “Speckgürtel”, or countryside.
According to a new study by the Allensbach Institute and the IW on behalf of the Sparda banks, consumers can save more than a third of the purchase price when buying a house or apartment in the countryside instead of the city. The average price per square metre for a home in the city is €4,180 compared to just €2,806 in the countryside, according to the study. Overall, prices per square metre in cities, metropolitan areas and in the countryside have risen by an average of more than one fifth in the past two years and the gap between cheap and expensive regions is widening.
‘In all of the Top 7 cities, more people work than live there,’ said Jan Grade, managing director of housing analysis consultancy Empirica Regio. ‘The cities continue to be strongly intertwined with the surrounding areas but the surrounding areas are becoming more important as places to work and, due to scarce living space and high prices, as places to live.’
Home office workers leading moving charge
In addition, COVID has also changed the way we all work and with more of us than ever working from home, location has become less important. According to a recent study of 12,000 people by the real estate portal Immowelt and the Ifo Institute, 10% of city dwellers plan to move elsewhere, with 40% saying they’d like to move to a smaller city and 22% choosing to move to the suburbs. Since the beginning of the Corona crisis, 14% of part or full-time employed city dwellers have moved away, a figure that rises to 24% for home office workers.
‘Since the Corona pandemic, we have observed on our platform that the demand for housing is increasing both in the metropolitan areas and in other rural areas,’ said Dr. Gesa Crockford, managing director of ImmoScout24. The desire is clearly more pronounced among men (62%) than amongst women (53%).
Subsequently, rural areas with good public transport links and motorway access are booming, according to real estate economist Pekka Sagner of the Institut der Deutschen Wirtschaft. As a result, all of Germany’s Big 7 cities are seeing people in the 30-50 age bracket move away, particularly from Frankfurt, Stuttgart, Munich and Cologne. One good example of this is the Berlin hinterland, such as the district of Dahme-Spreewald, which borders directly on the capital, and which has become a popular place to relocate to. Young people under 30, on the other hand, continue to be drawn to large cities and university towns such as Munich and Berlin, but also Regensburg, Leipzig and Erlangen.
The growing trend to move to the countryside is backed up by other recent studies, with a commute deemed a fair trade off for more affordable living quarters, the prospect of having one's own garden and nature on the doorstep. In fact, 57% of the population have already thought about moving from the city to the countryside according to a recent online survey conducted by Innofact on behalf of the brokerage portal ImmoScout24. Moreover, 65% of the 30 to 39 age group are considering such a move, according to the survey.
Understandably, lower housing costs are a decisive factor for 54%. Just under half (41%) of those surveyed cited environmental concerns, such as fewer car emissions, as an argument for moving to the countryside. According to the Innofact survey, 57% of those surveyed are also prepared to accept longer journeys and commutes to work.
‘The Deutschland-Ticket for local public transport offers many people the opportunity to commute to work in the city at a lower cost than before,’ Crockford said.
Housing shortage in the cities versus close to 2 million empty homes in the countryside
However, people are increasingly being forced to widen their search radius and leave the cities, according to Crockford. The average asking rent for an existing apartment in Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart is €13.51 per square metre, according to ImmoScout24, whereas the national average is considerably lower at €8.01. For an apartment totalling 70 square metres, this equates to a significant saving of €385 per month.
Nonetheless, more needs to be done at a federal level to entice people to give up city life. Federal Minister for Building Klara Geywitz (SPD) is keen to encourage more people to move to the countryside in order to alleviate the housing shortage in the cities, as she told the Funke Mediengruppe: ‘In Germany, there are an estimated 1.7 million empty homes,’ she said. ‘The majority of these homes are in rural regions.’ The government is planning, among other things, to improve local public transport to create better transport links to rural communities.
Unsurprisingly, prices in the surrounding areas of six of the seven metropolises have risen more strongly since 2017 than in the cities themselves, particularly in the areas outside Berlin and Hamburg. According to the Allensbach Institute and the IW study, moving from the metropolis to the surrounding area is particularly worthwhile in Düsseldorf, Frankfurt and Hamburg, where buying property in the suburbs is still 40% to 45% cheaper than in the city. In the suburbs of Berlin and Cologne, prices are around a third cheaper than in the city centre. Around Stuttgart and Munich, on the other hand, houses and apartments are now so expensive that you save less than a fifth.
So what is the cost of buying an average home? Typically, it is in the region of €388,000, although the amount of space you get for that varies enormously from a 44 square metres for an apartment in Munich to a 450 square metre house in the Kyffhäuserkreis in Thuringia. None of the seven metropolises offers more than 90 square metres of living space at that price point, the most being in Cologne with around 81 square metres. On average, buyers take out a mortgage for €328,000 to finance their purchase, putting down €60,000 of their own capital, or 15% of the total purchase price.
Home ownership stagnating in Germany
Around 48% of the population live in their own home. According to the Allensbach Institute and the IW study, this is strongly related to monthly income and also the size of the city in which one lives but homeownership in Germany has been stagnating for the past 12 years, making it one of the lowest levels in Europe. Interestingly, just 12% of those surveyed have seriously considered buying their own home in the last two-to-three years, just 8% have actually bought their own home in the same period and a whopping 75% of respondents weren’t interested.
German residential platform Immobilienscout24 has delved a little deeper to compare the purchase and rental prices in the centres of Germany's seven largest cities with those in their surrounding areas, investigating how much cheaper it is to live 15 to 30, 50, 75 and 100 kilometres away from the city centre. Take the example of Cologne, where they note that you can save up to 60% on the purchase price if you live between 50 and 100 kilometres from the city. In the Siegerland region, for example, the average price per square metre is just over €2,000. One reason for the disparity is that Cologne is the only one of the metropolises surveyed where purchase prices in the city have risen more strongly than in the surrounding area since 2019. At €8.64 per square metre, rents outside are around 23% cheaper on average than in the city itself.
More and more people are willing to take on longer commutes of an hour or more, according to Grade, who points out that in addition to opportunities, the urban exodus also inflicts ‘growing pains’ on the surrounding communities, including an increase in traffic and a higher demand for land upon which to build. In addition, rural areas need to increase the supply of day-care centres and schools and expand public transport links and the energy supply.
And rural life is not for everyone: ‘Those who move to the suburbs should be prepared for the fact that prices there can be significantly more volatile than in the metropolis,’ warned David Schmitt, a managing director at Engel & Völkers. According to a survey, 42% of rural property buyers struggled with their decision in the first year due to restrictions in the three Cs: social contacts, culture and consumption.
