German Property Investment – City Rankings

One of the things I have learnt about Germany since working there in 2006 is that they do like to collect statistics. Once analysed, and put into the context of the yield markets in which we operate, this makes our life as easy as analysts of the areas in which we operate and where we should be looking next.

One of the great tools we use is the city rankings table, effectively a ranking of the biggest 100 German cities against a number of current and forward-looking indicators. I want to share this piece of research with you, and use it to explain why we are where we are.

Firstly, lets look at the indicators that are used to come up with the 3 rankings which are Level today, the Dynamic or forward looking ranking and Overall Ranking.

Level Ranking

These are all factors which contribute towards a city’s current performance.

Dynamic Ranking

Next, the factors which contribute to the upward or downward trend in a city’s performance:

The overall ranking is a weighted combination of the two rankings.

For us at ProVenture, we really look to cities that have a good number of positive dynamic indicators, primarily population outlook but also some other economic changes. By doing this we hope to find areas where property yield is perhaps a little too high currently, based on the current level ranking, but has great potential for increase both in terms of rental and capital values.

So, lets look at the various rankings.

First off, who are the winners? It should be of no surprise that cities in the established and wealthy west of Germany come top in the current rankings. Cities like Munich [No 1], Baden-Baden [6] and Stuttgart [7] all do not surprise. And nor do the yields there on investment property. Typically, 2-5% yields would be available for investors, making it an area for cash only investors looking for an alternative asset class to cash in the bank and something to fund retirement perhaps. These markets, although performing extremely well in terms of capital growth these past few years, do not offer us an area in which our clients can participate for rental yield or cash flow positive positions after finance and all costs.

In terms of the Dynamic rankings, we find an almost inverted table with many appearances of East German cities as well as some smaller ones in the West. Cities that do well are Frankfurt (Oder) [5], Bremerhaven [9] and Berlin [30].

Lets look at the markets where we are to see how they fair.

Leipzig

This has been our key market for the last 4 years, the cities wealth of beautiful period property, the energetic buzz of the place and of course the great returns investors can secure. Our investors are buying here now for the continued investment returns and upward capital growth that the city is experiencing.

In terms of rankings, the following we find of interest:

GDP Per Capita – Now – 85th

Unemployment – Now 96th

Business Friendliness – Now – 40th

Job Supply – Now – 78th

Unemployment Trend – 20th

Job Supply Development – 6th

Employment Growth – 1st

GDP Growth – 40th

Population Growth – 7th

So, we see the city’s position clearly as one of lower prosperity in the past, but one that is developing on all key indicators very quickly.

Whilst the city is still near the lower end of the table for overall level ranking, and this is reflected in today’s prices, the cities development is clear [overall 41st] and is going on in front of your eyes. Come and see!

A full breakdown of this market is at:

Lowdown on investing in Leipzig

Our property price predictions for Leipzig in 2016

Factors that are causing rental increases in Leipzig

Bremerhaven

A relative newcomer to our offer, we have been operating in the city in 2011 after researching it for 2 years. Investors are coming here for the superior yields on offer, low vacancy of units and the lowest capital values across most of Germany [which actually increases 27% last year, off a very low base, things are starting to move].

Rankings we have of interest are:

GDP Per Capita – Now – 61st

Unemployment – Now – 98th

Business Friendliness – Now – 1st

Job Supply – Now – 85th

Unemployment Trend – 25th

Job Supply Development – 8th

Employment Growth – 15th

GDP Growth – 18th

Population Growth – 85th

Disposable Income Growth – 10th

Again, Bremerhaven’s recent past has not been favourable for the city. The fishing port saw declines over the last 30 years and a USA Naval base closure 10 years ago really hit this smaller city. The German government has injected huge funds to turn this around and we now see one of the brightest technology areas [wind power being the main player], a booming freight port shipping Germany’s exports and a dramatic rise in tourism from the development of the harbour area. These all feed into the forward looking indicators, but the rankings for population still did not favour well. In fact, in 2011 Bremerhaven has since posted its first population increase for 30 years, things are turning around. Despite this, we find the vacancy rate of good quality accommodation to be practically zero, in fact in some area it is in over demand. Letting agents are finding their work easy here!

A full breakdown of this market is at:

Bremerhaven Property Investment Report

Chemnitz

This is the 3rd biggest city in Saxony with its roots firmly in industry and manufacturing. The city is doing well out of the exporting boom Germany is enjoying now. Investors are coming here to by in the very best parts of the city, to secure high lending levels of 80% whilst still collecting 9-10% rental yields.

Rankings we have of interest are:

GDP Per Capita – Now – 80th

Unemployment – Now – 83rd

Business Friendliness – Now – 73rd

Job Supply – Now – 34th

Unemployment Trend – 17th

Job Supply Development – 22nd

Employment Growth – 92nd

GDP Growth – 39th

Population Growth – 77th

We have a more mixed picture in Chemnitz. One of the biggest problems of the city has been the chronic low birth rate, one of the lowest in Europe, although the economy and job supply does well. This feeds into investor confidence for the city, and allows yield investors to participate in the really high quality property in suburbs that have actually grown dramatically in the last years. So, know your streets here, but a very interesting place for investors seeking that elusive mix of high yield, great quality and the highest LTVs possible in the German market.

A full breakdown of this market is at:

Chemnitz Property Investment Overview

Halle

Well, we are yet to open this market but have a close eye to start and have been researching the area for the last 3 years. Being only 20 mins from Leipzig by train, the city enjoys the growth of its near by bigger brother, and has many new industries and companies investing there. Investors will looks here as a comparable to Chemnitz for good yields in the very best locations of town, which is possible as things are still picking up here.

Rankings we have of interest are:

GDP Per Capita – Now – 94

Unemployment – Now – 88

Business Friendliness – Now – 20

Job Supply – Now – 81

Unemployment Trend – 4

Job Supply Development – 9

Employment Growth – 68

GDP Growth – 96

Population Growth – 83

Disposable Income Growth – 68

Halle’s economic position has been low since the fall of the Berlin wall, fighting to keep workers from straying to bigger and more prosperous cities for higher-paid work. Well, the story is similar to Chemnitz, the good neighbourhoods offer excellent value today and are supported in terms of yield sustainability by very good demand and actually very high rents. The large university in the city plays no small part in bringing in money from richer parts of Germany, and student stay.

Summary

Hopefully this analysis shows well the areas we work in and gives you more flavour for a yield investor about the prospects for our cities. It should be remembered like unlike the rest of Europe, across Germany the economy is taking off. The top 96 cities all posted GDP growth, and have positive economic positions. Just get in touch if you have found this article of interest and want to chat some more.

Please contact us to find out more about this topic

Browse some properties that we have on the market in these cities in Germany