Empira Research: Ongoing stabilisation in German residential investments

Empira Research: Ongoing stabilisation in German residential investments

October 29, 2024

Germany
Steffen Metzne (Photo credits Empira Research)

The Empira Group has released its quarterly analysis of the current economic situation and real estate markets across various countries within and outside Germany, Austria and Switzerland, the DACH region. Prof. Dr. Steffen Metzner, Head of Research at EMPIRA-Group outlines the highlights:

'Although inflation rates are declining and monetary policies are in place to stimulate the economy, the economic situation in Germany remains tense. The German government’s autumn projection has revised the growth forecast for Germany from +0.3 percent in 2024 to an expected decline of -0.2 percent. In contrast, the USA, with a projected growth rate of 2.5 percent, leads among Western industrialised nations.

The overall economic situation in Germany still shows signs of stagnation, but there are early positive developments in the real estate sector. Current data points to price stabilisation and growing demand for real estate. Looking to the USA, economic forecasts for the coming year are marked by political uncertainty, as the country's economic trajectory is heavily influenced by the outcome of the presidential election,” commented Prof. Dr. Steffen Metzner, author of the study and Head of Research at the Empira Group.

The German Residential Real Estate Investment Market Stabilises

Sentiment in the residential new construction market remains cautious. Although both the business climate and business expectations stand at -47.9 and -48.4 points, slightly above the values of the previous year, in August, 50.6 percent of companies reported a lack of orders, and 11.7 percent reported cancelled orders. Coupled with decreasing completion numbers – from an expected 225,000 units in 2024 to a forecasted volume of 175,000 by 2026 – the persistent supply-demand imbalance in the German residential real estate market continues.

The German residential investment market’s development suggests a gradual stabilisation. In the first three quarters of the year, €5.9 billion was invested in residential portfolios with 30+ units, representing a 50 percent increase compared to the same period last year, although still 51 percent below the long-term average.

Almost All German A-Location Markets Exceed Rental Price Index

The rental price index has increased by approximately 2.2 percent across all German locations over the past 12 months. This figure is surpassed by all German A-locations except Düsseldorf. The most significant rent increases were recorded in Frankfurt am Main (+5.1%) and Hamburg (+4.2%).

In the second quarter, purchase prices in the top 7 German cities fell at four locations, with the sharpest declines in Hamburg (-7.5%) and Cologne (-3.0%). In contrast, prices remain stable in Berlin, Munich, and Stuttgart.'

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