Empira: German residential market resilient to all crises

The German residential housing market has proved to be very resilient to all crises, from the pandemic to financial meltdown, but the situation varies from city to city, according to new research that has just been published by The Empira Group.

Source: The Empira Group

Empira’s analysis of the German residential market focused on two periods: the financial crisis in 2009 and the Covid-19 crisis in 2020. Nationwide figures for both sales prices and rents remained relatively stable.

Despite adverse negative economic effects, the prices for real estate and rents did not fall significantly or at least did not remain low in the long term but recovered swiftly, showing the resilience of the market.

However, cities such as Stuttgart, Düsseldorf, Leipzig, Bremen, Dortmund, Hanover, Nuremberg, Duisburg and Bochum experienced negative changes in their rent growth rates in both crises. In contrast, cities such as Essen and Dresden displayed a relatively high degree of stability with very little fluctuation in rental growth rates during both crisis periods.

“The differing resilience of the housing markets may be attributed to a number of factors, including the economic strength of the city, the demand/supply ratio, the employment structure and the diversification of the local economy, as well as urban development measures and political decisions,” said Steffen Metzner, head of research, the Empira Group.

Steffan Metzner, Head of Research, The Empira Group

Given their stable economic structures and the comparatively low price volatility of the real estate markets, cities such as Cologne and Düsseldorf have displayed the highest degree of resilience.

Alongside resilience against price fluctuations, cities with a high level of demand and relatively high GDP growth, such as Berlin or Leipzig, offer the prospect of stability in times of crisis – something which makes them attractive for investors.

Cities with the lowest levels of supply have shown resilience due to persistently high demand. In major cities where demand outstrips supply, new arrivals and demographic developments create a stable demand base that shores up property prices – this, the research states, is the current situation in all seven top cities in Germany.

“Fundamentally, economic crises are closely linked to the development of the real estate markets,” said Metzner. “The reaction of the real estate markets to the economic challenges faced in 2009 and 2020 allows for initial conclusions to be drawn regarding the future crisis-resilience of the various locations.”

Business centres such as Frankfurt am Main, Stuttgart, Munich, Düsseldorf and Hamburg are in a strong position because of the concentration of economically significant and innovative companies, a favourable business infrastructure and strong global networking.

With a GDP growth rate of 50.7% over ten years, Berlin is the clear leader yet, despite numerous IT and media start-ups as well as cultural facilities, the city has still not attained the economic output of established industrial and service sector centres.