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Given German real estate's traditional regional differentiation, discerning future trends is helpful for investors and homebuyers alike. The annual Postbank Wohnatlas survey, conducted by the Hamburg Institute of International Economics (HWWI), provides a detailed prognosis of the residential property market up to 2035.
This comprehensive study, which we have covered for many years at REFIRE, rooted in a deep historical analysis of market trends since its inception, offers a nuanced view of the expected developments across Germany’s diverse regions. It is, of course, a forecast - and only time will tell how accurate the annual projections will have turned out to be.
The latest 2024 edition of the Postbank Wohnatlas reveals a stark bifurcation in the German real estate market: while some areas are poised for growth, others face the specter of declining property values. Approximately 40% of the 400 surveyed districts and cities are expected to see a decrease in owner-occupied apartment prices, with declines reaching or exceeding two percent below current levels by 2035.
Cities on the rise
Among the regions with a brighter outlook, the "Top 7" cities—Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, and Stuttgart—stand out, along with their surrounding areas and certain holiday regions. Munich, currently the most expensive city, is projected to experience a real annual price increase of two percent per square meter, underscoring its continued attractiveness to investors.
The study highlights the enduring appeal of locations with strong demographic and economic dynamics. For instance, Leipzig is spotlighted as a significant winner, with a forecasted annual price growth of 2.2 percent. “Leipzig leads the ranking of property price increases forecast up to 2035, ranks fifth in terms of expected population growth, and second in terms of predicted income growth,” notes Manuel Beermann, Head of Product Management Real Estate at Postbank parent Deutsche Bank. Similarly, Potsdam and Landshut are identified as cities with robust growth prospects, with expected annual increases of 2.0 percent and 1.9 percent, respectively.
The strongest price increase among the so-called Big 7 is once again expected by the experts in Munich. According to calculations by the HWWI experts, the price per square metre for owner-occupied apartments in Germany's currently most expensive major city will increase by almost another two per cent per year in real terms up to 2035. In the federal states of Baden-Württemberg, Bavaria, Hesse, Mecklenburg-Western Pomerania, Lower Saxony and Schleswig-Holstein, purchase prices will also rise in real terms on average across all regions.
Less optimistic outlook for rural regions, in both eastern and western Germany
Conversely, the outlook is definitely less optimistic for rural regions in eastern Germany, including the greater Berlin area, and parts of western central Germany, where property values are expected to either stagnate or decline sharply by 2035. These areas are primarily characterized by structural weaknesses and dwindling populations, factors that significantly depress real estate values.
The Postbank Wohnatlas highlights a concerning trend in approximately one in eight regions where property price growth is nearly non-existent, fluctuating between -0.15% and +0.15% annually. “In these regions, the aging population and declining birth rates are major factors contributing to the downward pressure on property prices,” explains Dörte Nitt-Drießelmann, Senior Researcher at the HWWI.
Cities Facing the Steepest Declines
Suhl and Mansfeld-Südharz: These regions are set to see the most substantial devaluations, with experts predicting sharp falls in property prices due to declining populations and economic stagnation.
Altenburger Land and Oberspreewald-Lausitz: Similar to Suhl and Mansfeld-Südharz, these districts are also expected to undergo noticeable price drops by 2035.
The trend extends to certain urban areas as well, particularly in North Rhine-Westphalia:
Remscheid: Despite its proximity to the thriving metropolis of Düsseldorf, Remscheid is forecasted to experience significant price drops, making it one of the major cities most adversely affected.
Ruhr Area cities: Cities like Hagen, Herne, Gelsenkirchen, Mülheim an der Ruhr, and Bochum are also predicted to face substantial declines. The economic and demographic challenges prevalent in these areas contribute to their bleak outlook.
Additional cities with expected declines: Other cities such as Würzburg, Heilbronn, Salzgitter, and Wuppertal are similarly forecasted to witness notable decreases in property values.
Strategic considerations for buyers and investors
The Postbank study serves as a useful tool for understanding regional disparities and planning investment strategies accordingly. Beermann advises, “Prospective buyers should consider annual averages for the entire region under consideration. Depending on accessibility, location, and amenities, there may be significant deviations from the average values in individual cases.”
As Germany approaches 2035, the real estate market presents a mixed landscape of opportunities and challenges. For those considering property investments, the key will be to closely monitor regional trends and demographic shifts, aligning investment choices with long-term growth areas while exercising caution in structurally weaker regions.
The Postbank Wohnatlas not only forecasts the future of property prices but also serves as a vital indicator of the broader economic health of regions across Germany. As always, staying informed through such comprehensive studies will be essential for making prudent real estate decisions in an increasingly complex investment environment. REFIRE will continue to keep you posted on any new survey updates.
