Eastern German cities in the fast lane
Recent research by INSM in collaboration with the ‘Wirtschaftswoche’ and carried out by IW Consult took 104 results of economical and infrastructure indicators into consideration such as GDP, incomes and investments, unemployment, the amount of highly qualified people by head and even debtor situations for a number of German cities.
The results are interesting and point to the excellent position in which many of the Eastern German cities find themselves.
It is estimated that demand for flats in Germany overall will increase over the next decade, regardless of the expected decrease in population due to ageing of the society, which will most likely lead to more single households. Stagnation in residential housing is estimated not to arrive before 2020. These results were published in a study by HSH Nordbank-Daughter branch HSH Real Estate AG ‘Forecast of the residential housing market in Germany to 2020’(„Wohnungsmarkt Deutschland: Perspektive 2020“).
It is also estimated that the amount of households will increase from 1.1 Mio to 40.5 Mio in 2020.
Germany is not all about Berlin, Munich or Western Germany. Eastern German property has been one of the most undervalued in the world. Investors from the UK, Holland and other countries have already recognised that the Eastern German property market offers exciting capital growth potential, strong and high yielding rental income and some of the lowest property prices in Western Europe. They invest heavily. Berlin, Saxony, Thuringia and Saxony-Anhalt are now top investment locations, overtaking regions such as Rheinland-Pfalz, Lower-Saxony and Nordrhein-Westphalia in Western Germany.
Top cities for property investment in Eastern Germany besides Berlin are Potsdam, Dresden and Jena but also cities like Leipzig, Rostock, Halle, Erfurt and Frankfurt/Oder offer good investment returns.
What should be noted is that 44% flats and 52% of family homes in Eastern Germany were built before World War II. Whilst properties were often in a less desirable state during the Communist Regime, they were heavily invested in and renovated after the German reunification during the ninety’s. Eastern German investment properties are in an excellent state of renovation, thus compared to Western German properties that will no doubt face a lot of cost for renovations over the next years to come.
A vast amount of outlived property was demolished, so there is only little vacant housing stock. Low rents and stable tenanted rental structure promise long term investment returns with good yields that make Eastern German property very attractive for investors.