31.01.2023
Content of this article
CONTENTS ON THIS PAGE:
- 1. Majority falling purchase prices in B and C cities
- 2. Property prices also falling in A cities
- 3. Growing real estate supply in B and C cities
- 4. More condos and houses also in A-cities
1. Majority of purchase prices falling in B and C cities
A challenging year lies behind the real estate industry - never before have so many external factors affected the market simultaneously. In addition to increased mortgage interest rates, prospective buyers face a lack of planning certainty, higher construction and renovation costs, and more restrictive lending policies on the part of banks. But what are the concrete effects of these market changes on real estate prices? VON POLL IMMOBILIEN experts have taken a closer look at the purchase price and supply1 trends of condominiums as well as detached and semi-detached houses in German B and C cities2 and, for this purpose, compared the average prices per square meter for the fourth quarter of 2022 with the first quarter of 2022.
Daniel Ritter, managing partner at VON POLL IMMOBILIEN:
'Since summer 2022, the real estate market has been in a state of flux. So far we have been in a pure seller's market, now everything turns into a balance for buyers and sellers. Prospective buyers have to recalculate due to increased financing interest rates, as their purchase budget has decreased. In addition, the cost of living has risen as a result of inflation. Buyers are therefore weighing their purchase decision far more carefully and are no longer prepared to pay any price set.'
A look at the following graph shows, that real estate prices and supply figures are correlated and there has been a visible shift in the current market situation for residential real estate in 2022 compared to 2021. While the supply* of condominiums and houses is increasing in all analyzed locations, the majority of average prices are stagnating or declining in 2022. Among the 35 B and C cities analyzed, prices fall in 29 locations. Only in six locations did prices increase.
Daniel Ritter, managing partner at VON POLL IMMOBILIEN:
'Undoubtedly, the greater choice in real estate counteracts the former excess demand. Demand and supply are leveling off again. In addition, this development also affects the price spiral of recent years.'
Fig. 1: Purchase price and supply development in 2022 compared to 2021 for condominiums and houses
The frontrunner with the most significant price increase in the fourth quarter of 2022 is Magdeburg (purchase price: 2,341 €/m2). In the capital of Saxony-Anhalt, prices climbed 15.8 percent despite changing market conditions.
Heike Hoffmann, branch manager of the VON POLL IMMOBILIEN store in Magdeburg:
'The fact that Magdeburg real estate prices have continued to rise can be attributed to the settlement of Intel. Since the announcement, we have seen a sharp increase in real estate inquiries. Accordingly, the price expectations of the sellers on the spot are also set high.'
Following Magdeburg is Duisburg (Purchase price: 2.426 €/m2) with an increase of 7.5 percent, Erlangen (purchase price: 4.872 €/m2) with 5.2 percent and Saarbrücken (purchase price: 2,180 €/m2) with 4 percent.
'Especially in the south of Duisburg, we have hardly registered any price declines so far. The reason for this is the high purchasing power of the surrounding cities such as Krefeld, Ratingen, Solingen and especially Düsseldorf. The higher the quality of the location and property, the more stable the prices. Very good locations in Duisburg include, for example, the districts of Rahm, Serm, Mündelheim, Buchholz, Großenbaum as well as Huckingen.'
Slightly less strongly, the square meter prices have increased with 2.5 percent in Dortmund (purchase price: 2,933 €/m2) as well as with 2.2 percent in Mülheim an der Ruhr (purchase price: 2.877 €/m2) in the fourth quarter of 2022 upwards.
Fig. 2: Purchase price development in the fourth quarter of 2022 compared to the first quarter of 2022 for condominiums and houses in percent
In Wuppertal (purchase price: 2,451 €/m2), Essen (purchase price: 2,778 €/m2), Darmstadt (purchase price: 4.487 €/m2) and Bochum (purchase price: 2,588 €/m2), average property prices for condominiums and single- and two-family houses stagnated between 0.5 percent and -0.5 percent.
Thorsten Claus, Branch Manager at VON POLL IMMOBILIEN Lübeck and Bad Schwartau
'Due to the large number of attractive employers, such as Thyssenkrupp or EON, Essen is growing very strongly. In line with the high demand, property prices are still stable. In particular, the high-quality locations continue to be very popular. Most in demand are the districts in the south of Essen, including Bredeney, Stadtwald, Rüttenscheid, Heisingen and Werden.'
Only slight price declines in the fourth quarter of 2022 compared with the first quarter of 2022 - still below the five percent mark - can be found in another seven cities. These include the Hanseatic city of Bremen (purchase price: €2,995/m2), with a decline of -2.1 percent, and the Brandenburg state capital Potsdam, which at €5,398 has the highest price per square meter in the entire ranking, with -3.5 percent. But also in Mannheim (purchase price: 3,947 €/m2) and Regensburg (purchase price: 4,959 €/m2), prices fall by -4.6 percent and -4.9 percent, respectively.
In the majority of the B and C locations analyzed, a total of 14 cities, the price declines are already somewhat more pronounced, ranging from -5 percent to -7.7 percent in the fourth quarter of 2022. In Offenbach am Main (purchase price: €4,098/m2), the purchase price level has fallen by -5 percent, while in Freiburg (purchase price: €5,339/m2), the city with the second-highest prices per square meter within the entire analysis, the figure is as much as -5.4 percent. While prospective buyers in Augsburg still had to calculate with an average of €5,001/m2 in the first quarter of 2022, in the fourth quarter of 2022 it was only €4,708/m2 - this corresponds to a decline of -5.9 percent. Property prices for owner-occupied apartments and detached and semi-detached houses fell even more sharply in Kiel (purchase price: 3,591 €/m2) with -6.8 percent, in Nuremberg (purchase price: 4,161 €/m2) with -7 percent, in Mönchengladbach (purchase price: 2.475 €/m2) with -7.4 percent and Bielefeld (purchase price: 2,840 €/m2) with -7.7 percent.
Among the four locations with the most striking price declines in the fourth quarter of 2022 compared with the first quarter of 2022 are one B-city and three C-cities. If the average prices for a square meter of residential property in the fourth quarter of 2022 in Hanover (purchase price: 3,736 €/m2) fell by -8.9 percent, it was in Osnabrück (purchase price: 2,903 €/m2) -9.1 percent. Even more clearly, in the two-digit percentage range, the prices gave in Erfurt and Luebeck. Whereas buyers in Erfurt paid €3,367/m2 in the first quarter of 2022, in the fourth quarter of 2022 the figure was just €3,025/m2, representing a price reduction of -10.2 percent. Lübeck thus called for €3,679/m2 in the fourth quarter of 2022, instead of €4,215/m2, as in the first quarter of 2022. Here, property prices fell the most, by -12.7 percent.
'Due to the large number of attractive employers, such as Thyssenkrupp or EON, Essen is growing very strongly. In line with the high demand, property prices are still stable. In particular, the high-quality locations continue to be very popular. Most in demand are the districts in the south of Essen, including Bredeney, Stadtwald, Rüttenscheid, Heisingen and Werden.'
2. Property prices are also falling in A-cities
'What is special about Frankfurt am Main is, among other things, the strong development of high-rise residential buildings, which cannot be found to this extent in any other German metropolis. The city is growing in width and in height. The 172-meter-high Grand Tower alone houses 413 apartments, while the Four high-rise ensemble accommodates 600 apartments - to name just two examples of the lively construction activities and neighborhood developments in and around Frankfurt over the past five years.'
Fig. 2: New construction share of housing stock, 2017 to 2021
The top four locations in this ranking are followed by Bonn with growth of 4.4 percent to 162,885 apartments, Berlin and Dresden with 4.3 percent each to 1,938,034 apartments and 300,985 apartments, respectively. Between 3 percent and 4 percent, on the other hand, the housing stock grows within the years 2017 to 2021 in Düsseldorf, Mannheim, Leipzig, Nuremberg and Wiesbaden.
The housing stock has developed least within the analysis period in Duisburg with only 1.2 percent to 249,971 apartments, Bochum with 1.6 percent to 190,921 apartments and Essen with 1.9 percent to 305,634 apartments. In Hanover, Karlsruhe, Cologne, Dortmund, Stuttgart and Bremen, housing is also growing by only 2 percent to 3 percent from 2017 to 2021.
All data and graphics may be used and published with a reference to the following source: von Poll Immobilien GmbH.
The graphics can be accessed digitally with embedding link here: https://www.datawrapper.de/_/5YA8W/ and https://www.datawrapper.de/_/ipPrY/.
1 As a basis for categorizing the German real estate market, VON POLL IMMOBILIEN uses BulwienGesa's classification into A, B, C and D cities. For this purpose, the cities were grouped according to their functional importance for the international, national as well as regional or local real estate market. BulwienGesa classifies seven A cities as the most important German centers with national and, in some cases, international significance as well as large, functional markets. The 14 B-locations include major cities with national and regional significance.
2 The data basis of approved and completed apartments is based on empirica regio and VON POLL IMMOBILIEN Research (2022) for the analysis period from 2017 to 2021.
3 The data basis of the existing buildings is the update of the residential building and housing stock as defined by empirica regio.
4 For a better comparability of the individual locations, the number of approved and completed dwellings per 1.000 inhabitants was adjusted based on data from empirica regio and VON POLL IMMOBILIEN Research (2022).
