Housing Market Report Germany 2016

Transcription

1 Housing Market Report Germany 2016

2 Dear Sir/Madam, The first Vonovia market report in conjunction with CBRE aims to give you a precise overview of the property market in Germany by analysing 29 of the largest cities and their housing markets in detail. In addition to the internationally renowned top seven cities, the report also presents some of the growth markets that will be of interest to investors in previously less intensively researched major cities in Germany. The report also tackles current issues in politics and society concerning demographic changes and the increasing migration into cities as well as the almost comprehensive shortfalls in new housing construction. The only moderately perceptible effects of the Mietpreisbremse (capping of rents on re-letting) and the strong influx of refugees will be additional core themes for the residential sector in We are convinced that sound market knowledge is indispensable for making financially sustainable investment decisions. That is why the report is based not only on extensive quantitative analysis of current market data and socio-economic conditions, but also on a representation of local peculiarities and, in some cases, unique trends in the respective markets. Rolf Buch Dr. Henrik Baumunk A summary overview of the attractiveness and potential for development in the various cities demonstrates fundamental differences between the markets. The following 29 detailed city profiles are imbued with our specific knowledge of submarkets, economic structures, cultural features and guiding principles in the residential sector. Numerous graphics and maps illustrate vivid trends and structures. The report concludes with an outlook on the key developments for the residential property market over the coming years, such as the announced tenancy law amendments. We hope you enjoy reading the report. Rolf Buch CEO Vonovia SE Dr. Henrik Baumunk Managing Director CBRE GmbH 001

3 CONTENTS Contents [004] Introducing the project partners: Vonovia and CBRE For the first time, Vonovia and CBRE present a joint housing market report on 29 selected cities in Germany. A brief look at the project partners. [006] The German residential property market in the political and public spotlight At the beginning of 2016, the German residential property market was dominated by high levels of migration into (major) cities, the adaptation of legal frameworks and the large influx of refugees. All of these factors pose new challenges to local housing markets. [008] City comparison: An extensive overview of the 29 markets in Germany Analysis of similar characteristics of the 29 cities studied and classification of the property markets into five groups respective of their socio-economic and housing-market-specific features. 002

4 CONTENTS [016] City profiles: Detailed analysis of the 29 cities The 29 cities in the spotlight. Extensive analysis of current trends and developments in the cities with regard to demographics, socio-economics and the local housing market Augsburg Berlin Brunswick Bremen Chemnitz Cologne Dortmund Dresden Duisburg Dusseldorf Erfurt Essen Frankfurt am Main Freiburg Halle (Saale) Hamburg Hanover Karlsruhe Kiel Leipzig Lübeck Magdeburg Mainz Mannheim Munich Nuremberg Rostock Stuttgart Wiesbaden [196] The German residential property market going forward What is the current state of the German residential property market against the background of current developments? What effects will the large influx of refugees have on housing markets? To what extent are general legal frameworks changing and what changes can be seen in the investment market? [198] Glossary and directory of sources 003

5 PROJECT PARTNERS Introducing the project partners: Vonovia and CBRE Vonovia Vonovia SE is one of the leading housing companies in Germany. The company is listed on the DAX 30 and currently manages approximately 357,000 apartments in attractive towns, cities, and regions throughout Germany. As a modern service provider, Vonovia s business revolves around customer orientation and tenant satisfaction. Offering affordable and attractive homes with a good quality of living is a prerequisite for the sustainable growth of our company. Vonovia apartments are predominantly located in cohesive developments distributed across 760 locations in Germany. All locations are served by property managers and an in-house network of tradespeople to respond to tenants concerns. This close relationship with customers ensures a rapid and reliable service tailored to tenants requirements. Vonovia invests sustainably in the maintenance, modernisation and conversion of its buildings in accordance with their age. The company also collaborates with local social and cultural projects that enrich neighbourhoods and community life. CBRE CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CBRE Residential Valuation Germany is a market leader in residential property valuation. In 2014, around 850,000 residential units, with a volume of approximately 48 billion were appraised. Please visit our website at Vonovia in numbers Apartments: ca. 357,000 Apartment size: 62 m 2 on average Employees: ca. 6,400 Investment volume 2016: 500 m 004

6 PROJECT PARTNERS THe 30 LarGesT VonoVia LoCaTions northern GermanY While Hamburg remains unchallenged as a top-seven major city with further prospects for growth, Bremen has also laid successful foundations for the future with its transition from shipbuilding to the growth sectors of aerospace engineering and biotechnology. The extent to which Kiel will manage to do this as the northernmost major city in Germany will depend on developments in the service sector and its positioning as the gateway to northeastern Europe. rhine-ruhr region With around 10 million inhabitants, this is one of the largest urban agglomerations in Europe. In Cologne, Dusseldorf, Dortmund and Essen, the region comprises four of the 10 largest cities in Germany. The transformation from industry to the education, research and service sectors is lending fresh impetus to all markets. Gelsenkirchen Essen Duisburg Aachen Dusseldorf Cologne Bonn Herne Dortmund Bochum Osnabrück Bremen Bielefeld Kiel Hamburg Hanover Brunswick HanoVer-bruns WiCK The location forms part of the Hanover- Brunswick-Göttingen-Wolfsburg metropolitan region with a population of some 4 million people. With an international exhibition centre, its location as a central European transport hub and a broad sector mix (automotive and mechanical engineering, logistics, energy and research), the region is well-equipped for the future. berlin The most populous city in Germany has transformed itself into a leading European location for the cultural and creative industries. Tourism is one of the largest sources of revenue and employment in the German capital. Domestic and foreign capital is particularly being invested in the real estate market, which is currently witnessing buoyant development activity. Berlin Dresden Wiesbaden Mainz FranKFurT/rHine-main The metropolitan region (more than 5.5 million inhabitants) comprising Frankfurt, Wiesbaden, Mainz and Darmstadt enjoys an international reputation as a financial centre, trade fair location and transport hub and is one of the largest economic regions in Germany. Frankfurt am Main Darmstadt Mannheim Nuremberg Karlsruhe Stuttgart Heidenheim dresden Dresden represents Vonovia s largest single location in terms of housing stock with almost 38,000 apartments. Along with Leipzig, the city has registered above-average population growth, which is attributable to the healthy employment market and good quality of life. Basis: Market value as of Freiburg southern GermanY Baden-Württemberg and Bavaria are the leading federal states in Germany in terms of population growth. The region is characterised by both high income levels and living costs. Munich 005

7 INTRODUCTION The German residential property market in the political and public spotlight It is incredible but true that, until only a few years ago, the German residential property market led a niche existence in the public consciousness. With a small number of exceptions, it was not difficult for tenants to find suitable housing at reasonable rents in most German cities. Following negative experiences with state-subsidised, newbuild satellite towns and poorly refurbished apartments in the federal states that emerged from the former East Germany, acquiring residential property was no longer a consideration for many private investors. Only a few wealthy families invested locally in apartments or apartment buildings. The government had completely withdrawn from subsidising social housing construction, and financially weakened cities and local authorities, as well as industrial companies, took particular advantage of the unbridled lending to investors between 2002 and 2007 to restructure by disposing of residential portfolios. Companies holding residential portfolios were still predominantly viewed by investors as low-margin, management-intensive, and static businesses. In recent years, this landscape has changed radically. Positive fundamental economic data led to foreign investors in particular rediscovering the German residential property market from The number and value of listed residential landlords rose constantly. Strong rises in rents and property prices, particularly in the economically attractive and sought-after areas, were suddenly headline news, leading politicians to place the Mietpreisbremse (capping of rents on re-letting) on their agendas. However, the perennial talk of a property bubble in 2013/14 currently seems to have abated somewhat. Private owneroccupiers and investors from Germany and abroad are taking advantage of the favourable financing conditions to invest in concrete gold. At the beginning of 2016, the German residential market was dominated by three issues: l Increased migration from within Germany and abroad into cities and its effect on local housing markets l The adaptation of legal frameworks resulting from changes in the local markets l The large influx of refugees from global crisis zones. HIGH IMMIGRATION, LOW SUPPLY Germany registered almost constant declines in net migration from 2001 and even saw negative net figures in 2008 and Since then, however, immigration has risen sharply. According to the Federal Statistical Office, net migration between 2010 and 2013 totalled 1.2 million people. In 2014 alone, there was positive net migration of around 550,000 people, the highest figure since This compares with a total of approx. 216,000 housing completions in Germany in 2014 plus refurbishment of around 29,000 existing residential units. When this is contrasted with around 159,000 units in 2009, the lowest completion volume since German reunification, it is possible to speak of a recovery in housebuilding. However, following housing completions of approx. 215,000 units in 2013, the growth in 2014 was rather modest. Overall, the comparison illustrates the growing discrepancy between supply and demand. However, the situation varies widely at regional level. German cities in particular are faced with major challenges. In addition to significant immigration from abroad, they are also exposed to high intra-regional migration flows. Until only a few years ago, cities were suffering major population losses in favour of their rural hinterlands. Now, the situation has changed radically. The return to the cities, and particularly city centres, has been a pronounced trend for a number of years. In addition to young educational migrants, increasing numbers of families and single-person households are being attracted by the benefits of city living, such as short travel times, good local amenities and a broad cultural offerings. In contrast with previous eras, they are also often 006

8 INTRODUCTION remaining in the city for the long term. Besides the consequent positive effects, such as increased tax revenues, this is also creating wide-reaching challenges for cities. Adapting the transport and educational infrastructures to enlarged populations are just a couple of issues to tackle in this context. There are particular challenges at present for urban residential markets, which are witnessing significant increases in demand for housing. The increase in completion volumes registered in many cities in recent years is insufficient to keep pace with the high levels of migration. Consequently, the discrepancy between supply and demand has produced housing market shortages in numerous cities and has ultimately resulted in rising rents and property prices (some of them significant) in many places. CHANGING LEGAL FRAMEWORKS The most recent developments also resulted in effects on the legal framework regulating the housing market in 2014/2015. In autumn 2014, the German cabinet passed draft legislation to curtail rental increases. The resulting Mietpreisbremse (capping of rents on re-letting) came into effect in June 2015, empowering federal states to enact appropriate regulations. The new regulations mean that asking rents on re-lettings of existing property must be no higher than 10 per cent above the level of local comparable rents in areas with strained housing markets. However, there are a number of exemption clauses. Newbuild apartments, for example, are completely exempt from the Mietpreisbremse. In addition, for the time being, 559 paras. 1 to 3 of the German Civil Code (BGB), which apply to rental increases on modernised property, allow 11 per cent of expenditure on the property to be recovered from the tenant each year. The small furnished apartment market segment is also outside of the Mietpreisbremse. According to research by CBRE, in addition to Bremen, Berlin, and Hamburg, a further 265 local authorities (independent cities and municipalities) in Baden-Württemberg, Bavaria, Hesse, North Rhine-Westphalia, Rhineland-Palatinate, and Schleswig-Holstein introduced the Mietpreisbremse by the end of CHALLENGE OF REFUGEE INFLOWS The third major issue dominating the residential property market at the end of 2015 was the large influx of refugees. The high number of refugees arriving in Germany from crisis and war zones also poses extensive challenges for the housing market. Numerous municipalities are desperately seeking accommodation for refugees and, in view of the fact that residential markets are already strained, the housing shortage is expected to become even more acute. However, the actual housing requirements generated by the influx of refugees into residential markets is difficult to quantify owing to a lack of reliable figures. The nationwide projections were repeatedly corrected upwards throughout According to official data, the 1 million mark had been reached by the end of In view of the socio-political importance of the residential property market, which has come firmly under the spotlight, the present residential market report seeks to contribute towards achieving greater transparency. The report illustrates the diversity of prevailing trends in the 29 largest local residential markets in Germany and discusses how cities are responding to the current multi-faceted issues. 007

9 CITY COMPARISON City comparison: An extensive overview of 29 markets in Germany Those who make investments reach their decisions based upon extensive and robust analysis. While the residential sector is long established in many ways, there are rapid developments afoot. For investors seeking to invest their capital in property, such current developments in the residential property market demand a detailed examination of individual locations and an in-depth analysis of markets and their prospects. The market report focuses on larger German cities with more than 200,000 inhabitants. These locations in particular are currently benefiting from a series of parallel developments, such as the strong influx of young people (from within Germany and abroad), the population growth due to refugees, the prospering economy, the revitalisation of city centres, the expansion of the education sector, numerous new-build projects, and civic engagement. We start on the following pages with a general overview of the cities. This includes the formulation of various types of markets and an analysis of the features and developments exhibited by the cities via relevant indicators for the housing market. This is followed by extensive profiles on the various developments and the afore-mentioned trends in the individual cities. SELECTION OF THE 29 CITIES The present report investigates all German cities with more than 200,000 inhabitants (as of ). The one exception is North Rhine-Westphalia. To avoid the dominance of this federal state (there were 15 cities with more than 200,000 inhabitants in this one state alone as of ), the report only includes those cities with a population above 400,000. However, with five cities in the report, North Rhine-Westphalia remains a geographical focus of the markets investigated. The largest of the cities studied is Berlin (approx million inhabitants), followed by Hamburg, Munich, and Cologne, all of which have over a million inhabitants. The smallest cities in terms of population are Rostock, Erfurt, and Mainz with only slightly more than 200,000 inhabitants. The cities are distributed geographically across 14 of the 16 federal states. Only Saarland and Brandenburg are not represented in the report as neither state contains a city with a population of more than 200,000. Besides Berlin, Bremen, and Hamburg, the remaining 26 markets are distributed across the federal states as follows: l Baden-Württemberg: Freiburg, Karlsruhe, Mannheim, Stuttgart l Bavaria: Augsburg, Munich, Nuremberg l Hesse: Frankfurt am Main, Wiesbaden l Mecklenburg-Western Pomerania: Rostock l Lower Saxony: Bruns wick, Hanover l North Rhine-Westphalia: Cologne, Dortmund, Dusseldorf, Duisburg, Essen l Rhineland Palatinate: Mainz l Saxony: Chemnitz, Dresden, Leipzig l Saxony-Anhalt: Halle (Saale), Magdeburg l Schleswig-Holstein: Kiel, Lübeck l Thuringia: Erfurt 008

10 CITY COMPARISON The 29 cities analysed according to population 200,000 to 249, ,000 to 499, ,000 to 999,999 Kiel Rostock 1 million and up Hamburg Lübeck Bremen Hanover Brunswick Berlin Magdeburg Essen Duisburg Dortmund Halle Leipzig Cologne Dusseldorf Erfurt Dresden Chemnitz Wiesbaden Frankfurt am Main Mainz Mannheim Nuremberg Karlsruhe Stuttgart Augsburg Freiburg Munich Population as of Source: Federal Statistics Office 009

11 CITY COMPARISON Top markets, good performers, trend reversers & Co. The cities studied differ not only in their size and geographical situation but also in their socio-demographic and socio-economic structures and trends. There are also significant differences in their respective housing markets. Each of the 29 cities analysed has its own, and in some cases unique, characteristics. These shape the markets as much as the similarities, which are equally identifiable. Fundamentally, the 29 cities studied can be classified into the following five groups with respect to their socio-economic and housing-market-specific features: 1. Top markets 2. Dynamic cities 3. Traditionally sought-after, average-sized markets 4. Good performers 5. Structural changers and trend reversers Top markets The top markets among the 29 cities analysed are major cities of above-average success with more than 500,000 inhabitants that have long been characterised by positive demographic and economic conditions and growth. As major financial, commercial and industrial centres, the top locations are home to major national and international companies and corporate headquarters. They also comprise major transport hubs, often of international significance. The top markets are attractive to a wide range of target groups and are magnets for influxes of migrants both from within Germany and abroad, resulting in strained housing markets. Overall, the top markets are typically characterised by the following features: l Consistently positive and predominantly above-average population growth owing to positive net migration and a corresponding increase in the number of households. Migration both from within Germany and abroad l Above-average purchasing power l Low to moderate unemployment and a high proportion of employees subject to social security contributions l Significant surplus demand in the housing market for all property types (apartments, single-family/ two-family houses and apartment buildings) and from private persons/owner-occupiers, private investors and institutional investors l Very low and further declining housing vacancy rates, already trending towards zero in many districts l High to the highest rents and property prices as well as generally consistent rises in asking rents and prices despite the already above-average levels l High purchase price multipliers and low yields l Low willingness to sell on the part of owners and consequent low supply of available properties or units Of the 29 cities analysed in this report, Dusseldorf, Frankfurt am Main, Hamburg, Cologne, Munich, and Stuttgart comprise the group of top markets. Thus, the group corresponds with the cities generally known as the top seven markets in Germany, with the exception of the capital Berlin. Owing to its current highly dynamic development and from a significantly lower base than the six other top seven markets on many indicators, Berlin is categorised among the dynamic cities. 010

12 CITY COMPARISON population growth from 2011 to 2014 the cities with the strongest growth indexed, population 2011 = Leipzig Frankfurt am Main Munich Augsburg Berlin Freiburg Dresden Stuttgart Cologne Mainz Germany Source: Federal Statistical Office, compiled by CBRE Dynamic cities The dynamic cities are characterised by rapid positive development in the recent past and have, therefore, increasingly come into focus for investors. From a low base, these dynamic cities show significantly above-average socio-economic development, both compared with their respective federal states and Germany as a whole, but still lag behind the top markets and the traditionally sought-after, averagesized markets with regard to these factors owing to their low starting point. However, the dynamic cities have further, possibly more extensive, potential for development, although the extent of this is dependent on the scale of development already witnessed, as well as future trends. Overall, this group is characterised by cities with the following features: l Significantly above-average growth in population and household figures l Below-average but rising purchasing power l Above-average unemployment rate but strong employment growth in recent years l Moderate rents and property prices compared with the top markets and the traditionally sought-after, average-sized markets l Strong increases in rents and property prices in the recent past with some exorbitant growth rates l Surplus demand in the housing market in the segments and locations preferred by migrants l Low or significantly declining housing vacancy rates l Rapidly rising purchase price multipliers Among the 29 markets analysed in this report, the group of dynamic cities comprises the German capital Berlin and by far the largest cities in eastern Germany, Dresden and Leipzig. 011

13 CITY COMPARISON Traditionally sought-after, averagesized markets The traditionally sought-after, average-sized markets among the 29 cities studied resemble the top markets in many aspects. However, as major cities with around 200,000 to 500,000 inhabitants, they are smaller than the top markets and normally have lower net migration from abroad. These cities are often situated in close proximity to the top markets or are at least closely connected to them via transport links. The cities in this group have often had important national or at least transregional functions as state capitals, centres of administration, or major university locations for decades, if not centuries. In addition, the cities in this group are characterised by the following features: l Consistently positive to above-average growth in population and household figures l Low to moderate unemployment and a high proportion of employees subject to social security contributions l Average to above-average purchasing power Top 10: change in employees subject to social security contributions 2004 to 2014 in per cent Leipzig Berlin Freiburg Hamburg Cologne Munich Karlsruhe Brunswick Dresden Kiel Germany Source: Federal Employment Agency, compiled by CBRE l High rents and property prices, mostly somewhat below the level of the top major cities but in some cases already higher l Continuing rises in asking rents and asking prices despite the already high levels l Surplus demand in the housing market, particularly in the apartment and single-/two-family house segments l Low to very low and further declining housing vacancy rates l Low willingness to sell on the part of owners and consequent low supply of available properties or units Traditionally sought-after, average-sized markets are predominantly found in southern Germany. This group comprises seven of the 29 cities studied: Augsburg, Freiburg, Karlsruhe, Mainz, Mannheim, Nuremberg and Wiesbaden. Good performers The next group among the 29 cities analysed, good performers, are generally characterised by a stable demographic and economic starting basis and positive overall development, which can even be (highly) vigorous in some areas. However, in contrast with the dynamic cities, these markets do not exhibit volatile growth but rather stable trends. The majority of cities in this group have a population of around 200,000 and are of at least transregional importance as centres of administration. The good performers in this report are normally characterised by the following features: l Stable to slightly above-average growth in population and household figures l Moderate to slightly above-average unemployment rates l Moderate rents and property prices compared with the top markets and the traditionally sought-after, average-sized markets l Rising asking rents and asking prices with even significantly above-average growth rates in places l Housing vacancy rate below fluctuation reserves of around two to three per cent l Moderate purchase price multipliers compared with the top markets and the traditionally sought-after, average-sized markets Among the 29 cities analysed in this report, the good performers group comprises Brunswick, Erfurt, Hanover, Kiel and Lübeck. 012

14 CITY COMPARISON Structural changers and trend reversers The fifth group among the 29 cities studied comprises the structural changers and trend reversers. These labels reflect the essence of the cities development. Structural changers are former industrial cities with high economic importance for the entire region. Following the demise of major industrial sectors in recent decades, these cities have undergone far-reaching transformations in the course of structural change. The largest challenges have now been overcome and the turnaround successfully negotiated. Consequently, economic fundamentals are trending upwards, albeit without the same vigour witnessed in other cities. With an ongoing process of improving structures and conditions for businesses to relocate to these cities, the structural changers are laying the foundations to keep up with the dynamism and development in other cities. The structural changers and trend reversers in this report are normally characterised by the following features: l Slight to noticeable positive population growth l Below-average purchasing power l Above-average unemployment rate, but often strong employment growth in recent years l Below-average to moderate rents and property prices l Positive to significantly above-average rental and price growth l Moderate to above-average housing vacancy rates with some significant declines in vacancy rates l Often still low purchase price multipliers Among the 29 cities analysed, Bremen, Chemnitz, Dortmund, Duisburg, Essen, Halle, Magdeburg and Rostock comprise the structural changers and trend reversers group. With an increase in asking rents of almost 12 per cent over the last three years, Dortmund has recorded the highest rental growth in this group. The weakest growth has been witnessed in Rostock, where asking rents have risen by just 0.6 per cent over the last three years. Top 10: change in asking rents 2012 to 2015 in per cent Berlin Augsburg Brunswick Hanover Munich Leipzig Dortmund Dresden Nuremberg Cologne Germany Source: CBRE, based on data from empirica-systeme CONCLUSION: NOT ONLY THE TOP MARKETS IMPRESS Investment in residential property is not only worthwhile in prospering cities with the best fundamentals. Upon closer examination of trends in indicators relevant to the housing market, it is evident that cities which have strengths in some areas and more modest results in others can also be impressive. Top markets or traditionally established locations are not exclusively the most promising cities for investment. Leipzig, for instance, has witnessed the strongest growth in terms of demographic trends in recent years. According to the latest available data, the population in Leipzig rose by 6.8 per cent within three years (end of 2011 to 2014), which was the highest growth among all 29 cities studied. Two of the top markets followed in second and third place in Frankfurt (+6.1 per cent) and Munich (+4.7 per cent), while Augsburg and Berlin (each +4.3 per cent) occupied fourth and fifth places. 013

15 CITY COMPARISON Munich has exhibited the highest purchasing power among the 29 cities analysed for years. With an average of 29,037 per capita, the city is significantly ahead of other top markets Dusseldorf ( 25,963) and Frankfurt ( 25,168) and far above the German average ( 21,865). Munich also tops the unemployment rate rankings with 5.2 per cent. The state capital of Baden-Württemberg, Stuttgart, ranks third with 5.7 per cent, while Karlsruhe (5.5 per cent), Mannheim and Freiburg (each 6.0 per cent), three of the traditionally sought-after, average-sized markets, are also among the five cities with the lowest unemployment rate. As already stated, there are many cities among the top 29 markets where rents are already high yet continue to rise. Munich topped the rental ranking by some distance with a median asking rent of per sq m per month. Asking rents in the city have also shown significant growth over the last three years (+13.4 per cent). Stuttgart, too, posted significant rental increases (+9.1 per cent) despite an already high asking rent of In addition to the continued high growth rates in these two top markets, the cities currently registering high rental increases are those starting from a lower base. The markets with the largest rental increases include two good performers (Brunswick and Hanover) as well as one dynamic city (Leipzig) and a structural changer (Dortmund). With an increase of 15.5 per cent, Brunswick posted the third highest increase in asking rents over the last three years among the 29 cities studied. However, the average asking rent of 7.16 per sq m remains moderate in comparison to the cities analysed. The same is true of Hanover (+14.0 per cent to 7.50), Leipzig (+12.6 per cent to 5.63) and Dortmund (+11.5 per cent to 6.00). SOPHISTICATED ANALYSIS ESSENTIAL The top markets are not alone in demonstrating that cities with highly positive socio-demographic and socio-economic trends, as well as high rental levels, also frequently have high sale prices and high multipliers. Apartment buildings in corresponding locations are often only of interest to risk-averse or private investors. However, the observations in the report also demonstrate that, in addition to the markets that are traditionally strong in almost all areas and have correspondingly high price levels and scarce supply, there are also cities with significant strengths in some aspects and that may be attractive not only to opportunistic investors with a greater appetite for risk. For investors, therefore, it is essential to look more closely and analyse cities in-depth in respect of potential investments. The report also subjects the 29 cities to a detailed analysis with regard to demographics, socio-economics and the housing market and provides the reader with information on trends and developments in the respective markets. Numerous graphics provide information regarding current developments. The standardised layout of these enables direct comparison with the other markets or national figures. With regard to the housing markets, there is a particular focus on the rental apartment market, which is a defining segment for cities. Based upon postcode areas, each of the 29 cities has been divided into spatial categories with the same rental levels. This enables a small-scale analysis of the asking rents in each city. The profiles are complemented by numerous graphics, tables and observations, providing extensive information on the 29 cities. In many cities, vacancies are now significantly below fluctuation reserves. Consequently, 22 of the 29 cities analysed recorded a vacancy rate below three per cent. Strong growth in population, often combined with insufficient building activity, has depleted the necessary reserves causing contraction in the number of available units. Four of the 29 cities analysed even registered an active market vacancy rate below one per cent; namely Munich, Frankfurt, Hamburg and Freiburg. In contrast, the vacancy rates in Leipzig, Halle and Chemnitz were markedly higher, ranging between 6.0 per cent and 9.2 per cent. However, in these dynamic or trend-reversing cities, vacancy rates have also fallen from double-digit levels in recent years and in some cases significantly. 014

16 CITY PROFILES Detailed analysis of the 29 cities 015

17 CITY PROFILE n AUGSBURG Augsburg: Home of innovation Augsburg knows how to structure change. The former textile stronghold is now a leader in the fibre composite, mechatronics & automation, environmental technology and IT sectors. Despite its close proximity to Munich, rental levels are moderate. With 281,111 inhabitants, Augsburg is the third-largest city in Bavaria after Munich and Nuremberg and the only city in Germany with its own civic holiday. Since 1650 the Augsburg High Peace Festival has celebrated the equal status of the Catholic and Lutheran confessions that was gained in the Peace of Westphalia. The city is notable for its many creative minds and innovative developments. Jakob Fugger laid the foundations here for the modern financial economy, Rudolf Diesel developed the engine that is named after him, Johann Heinrich von Schüle was one of the biggest textile manufacturers of his time, and the grandchildren of the aviation pioneers from Augsburg are now active in the city s aerospace companies. Economic strength and social responsibility have always gone hand in hand in Augsburg. The Fuggerei, whose name harks back to a foundation of the merchant Jakob Fugger from 1521, is the oldest social housing estate in the world. The annual rent for the apartments, most of which are 60 square metres in size, is still one Rhenish Gilder, now 0.88, together with three prayers a day for the salvation of the founding family. The Altstadt (Old Town), with its narrow alleys and corners, the preserved weirs, the city walls and the Lech canals, also contributes to Augsburg s historical flair. Numerous water towers and the hydropower stations at the Wolfzahnau or at the Hochablass, bear witness to a long tradition of hydraulic engineering in the city. With its historical water management, Augsburg is now on the list of cities under consideration to become a UNESCO World Heritage Site. 016

18 CITY PROFILE n AUGSBURG The City of Augsburg in Bavaria is one of the world s leading locations in the manufacture of robots. Augsburg-based companies in the field of automation produce more than 60 robots per day. LOOKING TOWards A PROFITABLE FUTURE Augsburg benefits from good transport links with Munich, situated around 80 kilometres away, via the A8 motorway. The Bavarian capital can also be reached within just 30 minutes or so via ICE high-speed train. Augsburg s railway station is currently undergoing conversion into a transport hub to improve the co-ordination of the tram, regional railways and long-distance transport networks at a cost of some 150 million. The city has coped with the downfall of the traditionally strong textile industry and the withdrawal of the US armed forces in the 1990s and has managed an impressive structural change. With a network of companies, research and funding institutions, associations and education and training institu- 017

19 CITY PROFILE n AUGSBURG tions, Augsburg has a high level of future potential in the mechatronics and automation, fibre composite technology, environmental technology and information and communication technology sectors of expertise. In addition to major companies, such as KUKA, MAN Diesel & Turbo, and MT Aerospace, there are numerous innovative small and medium-sized enterprises in Augsburg. Augsburg also has a vibrant research landscape. The University of Augsburg, the university of applied sciences, and numerous institutions and project groups co-operate closely with industry. A new institute building for materials resource management at the University of Augsburg is in the pipeline at a cost of 42.3 million, which, together with other research institutions in Augsburg, namely the Fraunhofer-Ge sellschaft and the German Aerospace Center, will consolidate academic expertise in the fields of business information systems, materials sciences and resource management as well as mechatronics, information technology and software. A key milestone in the networking of science and industry is the Augsburg Innovation Park. On a site covering 70 hectares, one of the largest innovation parks in Europe, which also includes the Augsburg Technology Centre, is being created near the city centre. Furthermore, Messe Augsburg is the third-largest exhibition centre in Bavaria. POSITIVE TREND IN HOUSEHOLD NUMBERS The number of households in Augsburg is expected to grow by 3.7 per cent between 2012 and From 2009 to 2013, annual net migration of young adults from the EU-27 countries grew significantly. More than half of incoming persons in this age group are education migrants, who usually come to the university of applied sciences at the beginning of the winter semester. Consequently, the proportion of young people under the age of 30 represents the largest age group in Augsburg at 33 per cent. However, demographic change will also become noticeable in Augsburg during the next 20 years. According to a small-scale population projection conducted by the City, the share of people under the age of 30 is expected to fall by 1.3 per cent in comparison to 2011, with the share of those over the age of 60 rising by 13.7 per cent. In terms of the individual districts, the projection assumes population growth, particularly in the districts near the city centre. However, if the influx continues in line with previous years, mainly in the 20 to 25 year-olds age group, Augsburg will age more slowly than projected. For the entire city, this will result in a relatively lower rise in the average age, from 42.5 in 2010 to 43.7 in RISING RENTS, MODERATE LEVEL The median asking rent in Augsburg has risen by 17.1 per cent from 7.26 per square metre in 2012 to 8.50 in This places Augsburg second out of the 29 cities in terms of rental growth, behind Berlin, which probably owes much to the city s proximity to Munich. However, compared with the average rent of in the Bavarian capital, which is only 30 minutes away by train, rents in Augsburg are still at a moderate level. The highest median asking rents in 2015 were recorded in the Antonsviertel and Hochfeld areas as well as the university quarter [01], to the south of the city centre, at Due to its close vicinity to the university, the area is particularly popular with students as well as university employees. The city centre can be quickly reached by public transport. The university quarter began to emerge in 1973 on the former site of the factory airfield of Messerschmitt AG, which, following a number of acquisitions, now belongs to Airbus subsidiary Premium Aerotec. The prevailing high-rise apartment buildings do not appear uniform or anonymous due to the diverse design, the individual facilities and 018

20 CITY PROFILE n AUGSBURG DISTRIBUTION OF ASKING RENTS IN AUGSBURG 2014 AND 2015 Proportion of offers at the respective rent price in /m 2 /month % 50% 40% 30% 20% 10% 0% under to to to to and over In 2015, the majority of asking rents ranged between 7.00 and However, the share of high-priced rents particularly increased, especially affecting the segments ranging from 9.00 to their reasonable height, with rarely more than six storeys. Many streets are free from cars and embellished with rows of trees and landscaped spaces. The Antonsviertel area still features many well-preserved, post-classical or new-baroque buildings and usually open developments with many landscaped spaces. However, buildings are also found here that were constructed during the modern building culture of the 1950s to 1970s after the demolition of the historical buildings. The median asking rent in Augsburg city centre was of a similarly high level at 8.95 per square metre [07]. The city centre is divided into the Oberstadt (Upper Town), with its wide shopping streets, and the Unterstadt (Lower Town) and Altstadt areas with their narrow, winding alleys. The Altstadt in Augsburg, which is one of the largest old towns in Germany by area, provides a high quality of life now since being extensively renovated from the 1980s onwards. Due to its many creeks, canals and bridges, the Key Figures for the housing market Augsburg Bavaria Germany Average asking rent 2015 in /m²/month Average size of apartments on offer 2015 in m² Vacancy rate in apartment buildings 2014 in % Newly finished apartments 1) per 1,000 residents Of which are in apartment buildings 2) ) in residential and non-residential buildings, excluding renovations, incl. halls of residence, subject to available data 2) incl. halls of residence, subject to available data Sources for graphics and tables: CBRE based on data from empirica-systeme, CBRE-empirica vacancy index, State Statistical Offices, Municipal Statistical Offices, Federal Statistical Office, Federal Institute for Research on Building, Urban Affairs, and Spatial Development (BBSR), Michael Bauer Research, Federal Employment Agency 019

21 CITY PROFILE n AUGSBURG Asking Rents in AUGSBURG 2015 City area Number of rental offers Apartment size, average in m 2 Median rent excl. utilities, in /m 2 /month [ 01 ] Antonsviertel, Hochfeld, University quarter [ 02 ] Bärenkeller, Kriegshaber, Oberhausen [ 03 ] Bergheim, Göggingen, Inningen [ 04 ] Firnhaberau, Hammerschmiede [ 05 ] Haunstetten-Siebenbrunn [ 06 ] Hochzoll [ 07 ] City Centre [ 08 ] Lechhausen [ 09 ] Pfersee [ 10 ] Spickel-Herrenbach Augsburg average , district is frequently referred to as Little Venice. As the alleys and streets in the Altstadt area are free from through traffic, it is a very quiet residential location despite its central location. The lowest median asking rent in Augsburg was found in the Haunstetten-Siebenbrunn [05] area in the south of the city at 7.92 per square metre. However, this has risen sharply in recent years from an average rent of just 6.90 in In view of the moderate rental levels by citywide comparison and the fact that rents are rising throughout the city, it is not improbable that the area will see further rental growth. The surrounding areas, particularly the Siebentischwald, Haunstetter Wald, and Stadtwald forests offer a pleasant contrast to the working day. Augsburg city centre can be reached within 15 minutes by public transport. The densely-populated Haunstetten area is renowned for the major Messerschmitt factory created at the start of the 20th century. Siebenbrunn, meanwhile, epitomises the rural character of the district. The Mietpreisbremse (capping of rents on re-letting) came into effect in Augsburg on 1 August Since the city does not have a rent index, it remains to be seen how the local comparable rents will be calculated. Indeed, this may pose a number of challenges. AUGSBURG IS RICH IN TRADITION AND possesses A PIONEERING SPIRIT IN RESEARCH Augsburg is the third-largest city in Bavaria and, with the Fuggerei, home to the oldest social housing estate in the world. Augsburg has particular economic strengths in the fields of mechatronics and automation, fibre composite technology, environmental technology, and information and communication technology. The positive population and economic growth, as well as the city s location within the catchment area of Munich, resulted in a 17.1 per cent increase in asking rents between 2012 and 2015; the highest growth across all cities in Bavaria. Further rental and price growth is expected going forward. However, the median asking rent of 8.50 per square metre remains moderate in comparison to Munich. 020

22 CITY PROFILE n AUGSBURG average asking rents in CiTY areas Insufficient number of cases Median in /m²/month

23 CITY PROFILE n BERLIN Berlin: Rising pressure from economic and population growth Following times of high unemployment and debt, the German capital has witnessed above-average growth in recent years. Asking rents are rising consistently and, thanks to increases in population and purchasing power, this is now also true of the outskirts of Berlin. Berlin s economy is undergoing dynamic growth. Between mid-2014 and mid-2015, the gross domestic product rose by 1.7 per cent on a price-adjusted basis, which is ahead of the German average (+1.4 per cent). Following German reunification, Berlin is once again in the heart of Europe and has established itself as an international centre of culture and government. Government, parliament, associations, media, and other institutions in the capital provide a solid basis, which is largely independent of economic performance. However, the city has enjoyed particular economic growth in the construction industry, commerce, gastronomy, and the information and communication sector; it boasts the largest number of Internet start-ups in Germany. The largest single sector in Berlin is tourism. The city is the third most popular destination in Europe behind London and Paris. Berlin s industrial sector is also growing again following a prolonged period of weakness. Other key sectors in the capital include vehicle and engine manufacturing, pharmaceuticals, medical technology, and electrical engineering. The number of people in work rose overall by 1.3 per cent from the second quarter of 2014 to the corresponding period in 2015, according to the latest available figures, which was the highest increase across all federal states. HOUSING: SHARP RISE IN DEMAND Demand for housing in Berlin is being driven by increases in population and household numbers as well as disposable income. Even before the large influx of refugees, the population was growing consistently by around 40,000 per year. Between the end of 2011 and the end of 2014, the total number of inhabitants in the city rose by 4.3 per cent to 3,469,849. As a result of the grow- 022

24 CITY PROFILE n BERLIN The German capital, Berlin, is immensely popular with new arrivals. In recent years, the city has gained around 40,000 new inhabitants annually as a result of immigration. ing population, the number of households in Berlin is rising by more than 20,000 per year. In 2011, Berlin s Senate expected the population to rise by approximately 250,000 by However, in view of current population growth, these projections appear far too conservative. While construction activity has recently risen, the supply of housing cannot keep pace with this growing demand. In 2014, almost 7,300 residential units were completed in the city (in new residential and non-residential buildings including residential homes). However, the absolute figure falls significantly short of growth in population and households. In 2015, new-build activity gained significant momentum. The number of planning approvals for residential units (in new residential and non-residential 023