15th ACCENTRO Homeownership Report 2022

 Record Revenues of EUR 43bn on Homeownership Market

• Nearly 20 percent growth in revenues in Germany, with Berlin remaining the fastest-selling city
• Number of transactions increases by 4.4 percent
• Highest number of sales per 1,000 residents in Leipzig and Chemnitz
• Average apartment price now at 250,272 euros and at 456,233 euros in the “Big 8”

Berlin, 29 September 2022 – Revenues from apartment sales in Germany’s 80 biggest cities rose by 19.4 percent to a record level of nearly 43 billion euros in 2021. Analogously, the absolute number of ownership apartments sold grew by 4.4 percent to 127,967 apartments. This is the upshot of the 15th ACCENTRO Homeownership Report 2022 that was compiled by ACCENTRO Real Estate AG in collaboration with the German Economic Institute (IW). Within the framework of an ad-hoc extraction, the IW team of Prof. Dr. Michael Voigtländer also examined the ramifications of the increase in building finance rates and of the inflation on the homeownership market.

The ACCENTRO Homeownership Report is the only German publication that aggregates and interprets the data that municipal property valuation committees retain on apartment sales in all major German cities. In this regard, the report differs from other publications of this type, which tend to rely on expert appraisals or the evaluation of supply-side data.

Double-Digit Growth in Revenues

Total revenues in 2021 increased by 19.4 percent compared to the previous year, rising from 36 billion euros to now 42.864 billion euros. During the same period, the number of transactions increased by 4.4 percent to a total of 127,967 sales. In the “Big 8,” meaning Germany’s eight largest cities (Berlin, Cologne, Düsseldorf, Frankfurt am Main, Hamburg, Leipzig, Munich and Stuttgart), apartment sales registered a 9.63-percent increase up to a total of 55,939 transactions. The fastest rise in revenues over the past ten years were primarily recorded in mid-size cities in eastern Germany such as Gera (+774 %), Halle/Saale (+468 %) and Chemnitz (423 %). Cities where sales declined include Siegen and Remscheid.

“The mid-size cities acted as stabilising anchor of last year’s revenue figures. As a result, these cities are attractive for buy-to-let investors. Their robust performance is often explained by sound economic conditions and low entry prices,” explained Lars Schriewer, the CEO of ACCENTRO Real Estate AG. “It is a trend that has gradually emerged over the past ten years. At the same time, our report shows that demand in the metropolises remains high.”

Among the ten cities with the fastest revenue growth over the past ten years are, in addition to Gera, Halle (Saale) and Chemnitz, other mid-size cities such as Magdeburg (+332 percent) and Offenbach near Frankfurt with a revenue increase by 299 percent. The number of apartments sold dropped in 41 of the 80 examined cities in 2021. At the other end of the scale, you find 16 cities that recorded double-digit percentage growth. These alone claimed a 38-percent share of all sales. Wolfsburg, home to Volkswagen, made the record with the biggest increase in the number of transactions (+75 percent), trailed by Kassel with a 42-percent increase.

Growing Motivation to Buy

Despite the persistently strong demand for housing, the supply shortage, and the inadequate completions figures, the year 2021 was characterised by demonstrable catch-up effects as far as the number of transactions goes, especially in the “Big 8” cities. Berlin is taking the lead here: The 19,784 apartment sales registered in the German capital account for more than 15 percent of all transactions. Runner-up is Munich with 10,965 apartment sales while Hamburg came in third with 6,241 sales. Given the size of these cities, this is not much of a surprise. Striking to note is that Leipzig and Dresden (with 5,481 and 4,071 units sold, respectively) are among the top 5 here, ranking fourth and fifth.

“There were 34 German cities with more than 1,000 transactions in 2021. This is a figure that has been stable for years, yet it also underlines the small-scale nature of the German housing market. So, even as the ten largest cities claim half of all transactions, investors showed keen interest in cities with lower transaction figures,” elaborated Prof. Dr. Michael Voigtländer, head of the research unit financial and real estate markets at the German Economic Institute (IW), who was once again in charge of the data collection this year.

Highest Number of Property Sales per 1,000 Residents Recorded in Leipzig

Real estate in eastern Germany is currently trending among buyers. With 9.1 apartments sold for every 1,000 residents, Leipzig took the lead. Chemnitz, while maintaining its ratio of 8.6 apartment sales per 1,000 residents, was demoted to second place. Particularly vibrant residential property markets are found in northern Germany (e. g. Bremerhaven), in eastern Germany, (e. g. Dresden and Gera), but also in the Bavarian cities of Fürth, Munich, Augsburg and Regensburg. The average ratio among the 80 markets studied is 4.3 apartment sales for every 1,000 residents. The metropolises Berlin (4.37), Düsseldorf (4.79), Munich (6.62) and Stuttgart (4.84) exceed the average, whereas Frankfurt am Main (4.15), Hamburg (3.25) and Cologne (3.70) fall short of it.

“The transaction figures keep going up. However, ownership apartments remain a scarce commodity, and demand is as strong as ever. As a result, steadily rising prices coincide with transaction figures that are still below the level recorded a few years ago,” Lars Schriewer added. “Finding an apartment is not getting any easier or cheaper for buyers.”

Between 2020 and 2021, the average price tag of an ownership apartment rose to 250,772 euros, which implies an increase by 10.97 percent. At 13.84 percent, the growth in the “Big 8” cities was even faster, and selling prices higher at an average of 456,233 euros. In Munich and Hamburg, buyers continue to look at average price tags beyond the mark of 500,000 euros, but even Frankfurt am Main has lately joined this illustrious club with 555,804 euros on average.

Berlin Keeps Showing a Strong Revenue Performance and a Significant Increase in Transactions

Meanwhile, Germany’s first city registered a very large number of transactions after a year-on-year increase by 20 percent. Although it should be remembered that the pandemic caused the number to fall by eleven percent the year before, even a two-year comparison returns an increase by seven percent. The surge is reflected in a revenue growth by 157 percent up to a total of 8.3 billion euros. In this as in other rankings, Munich scored second place with nearly seven billion euros in revenues from apartment sales. Bringing up the rear among the “Big 8” cities is Stuttgart with 1.2 billion euros worth of transactions.

New-Build Units Still Hard to Get, Accounting for One in Five Sales

A total of 25,274 new-build units were sold in 2021, the cities with the highest number of sales being Berlin (3,796), Munich (3,045) and Hamburg (1,574). Collectively, the number of sold apartments increased by 2.5 percent in the 80 cities examined. Some of the “Big 8” cities saw their new-build apartment sales increase at double-digit percentage rates, among them Berlin, Munich, Leipzig and Frankfurt am Main. In 50 of the cities, sales figures flatlined or declined. “The real estate industry is currently facing major challenges on the cost side. Rising interest rates, but also shortages in materials and skilled workers, are hampering efforts to achieve the government target of 400,000 new apartments completed per year. Given the current parameters, the high construction output of 2020 is probably a thing of the past. But demand has maintained its high level and will not contract in the years ahead. In fact, there is a good chance that the situation will trigger further price hikes,” explained Lars Schriewer.

Following the banner year of 2020 with 306,000 apartments completed, the completions total of 2021 represented a first set-back with a total of 293,000 units. To achieve the targeted construction output of 400,000 units annually, capacities would have to be drastically expanded, yet quite the opposite is happening. In the coming year, housing organisations expect to see the annual completions figure decline further by 50,000 to 70,000 apartments. New apartments will continue to be in short supply. On the bright side, this helps to stabilise the prices of new apartments or may even prompt further price hikes.

Interest Rates, Inflation, Construction Costs: Housing Supply Shortage will Drive up Prices

Bundesbank and research institutes currently project an inflation rate of seven to eight percent for the ongoing year. Growing building finance rates and construction costs have deepened the sense of uncertainty on the capital market and slowed the economic growth. Other factors such as a shortage of skilled labour and material bottlenecks ultimately result in a steady slowdown of construction activities, and this despite growing demand.

“Considering the current circumstances, residential real estate is a secure buy-to-let investment and an effective inflation protection. Housing has been and continues to be a basic need, and rising costs can be passed on via rent reviews in the longer term,” explained Prof. Voigtländer. “Since demand for housing has remained strong, we expect prices to keep going up indefinitely.”

“If rent rates were to go up as a result of inflation, it would have a positive effect on property prices. Once the short-term repercussions of the war in Ukraine and the energy crisis have been overcome, wage increase should permit rent reviews to compensate for inflation,” Schriewer added.

Another finding of the ACCENTRO Homeownership Report 2022 is that Germany’s conurbations continue to offer attractive market-entry opportunities for buy-to-let investors with a long-term horizon. In the short term, the current uncertainties will translate into serious opportunities for investors with resolve and a solid equity basis because the competition is less fierce for the time being than it was over the past years. Once the economic uncertainties begin to ease, the interest in homeownership will quickly rebound. The increase in demand thereby generated will influence the pricing of the anyway short supply, so that revenues will probably keep soaring.

About the ACCENTRO Homeownership Report

This year’s edition marks the fifteenth time that ACCENTRO Real Estate AG published the ACCENTRO Homeownership Report. Like last year, the homeownership report was compiled in collaboration with the German Economic Institute (IW). Its analysis is based on the ownership apartment sales transacted in Germany’s 80 most populous cities during the reporting year of 2021. A significant distinction that sets the report apart from similar publications, most of which rely on expert appraisals or on analyses of supply-side data, is that it draws on the data of the cities’ property valuation committees. The report consists of two different parts. While the first part compares the various housing markets, using a variety of criteria, the second part breaks down the market data for each of the 80 cities studied. The findings of the ACCENTRO Homeownership Report on Germany’s eight most populous cities and the trends of the past twelve years are also available online, and may be retrieved in the form of selective drilldowns: https://accentro.de/wohneigentumsreport

About ACCENTRO Real Estate AG

ACCENTRO Real Estate AG is a residential property investor and Germany’s market leader in housing privatisations. Its real estate portfolio consisted of around 4,900 units as of 31 December 2021. In addition to Berlin, regional focal points include eastern German cities and conurbations, as well as the Rhine-Ruhr metro region. The business activity of ACCENTRO comprises three core divisions. They are the tenant-sensitive retailing of apartments to private owner-occupiers and buy-to-let investors as well as the selling of real estate portfolios to institutional investors, and the build-up and management of a proprietary real estate portfolio, plus the provision of services for third parties. The shares of ACCENTRO Real Estate AG are listed on the Prime Standard segment of the Frankfurt Stock Exchange (German securities code number WKN: A0KFKB, ISIN: DE000A0KFKB3). www.accentro.de

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