The year 2013 was unexpectedly strong, with cash turnover and the average price per apartment block sold in Hamburg rising to the highest level seen for ten years. These findings are reported by the Municipal Real Estate Evaluation Committee of Hamburg in their 2013 market survey. The total transaction volume of 1.2bn € was even higher than in the previous boom years of 2006 and 2007. In 2013 the average purchase price per property rose to around 2.89m €. Multiples rose by around 21% to reach prices of 18.7 times the annual net rent. At 411, however, the number of properties sold was virtually unchanged (2012: 404).2013: No Consolidation As Prices Shoot Up
“In the previous year there were considerably more transactions in the most favoured, good locations within Harvestehude, Winterhude and Eimsbüttel. Instead of consolidating, prices have leapt up once again,” says Joern Olaf Ridder
, head of the residential properties/apartment blocks department of property services provider Grossmann & Berger commenting on the company’s own survey of the market for rental apartment blocks published today.Multiples Rise as High as 29 in 2014
Grossmann & Berger estimates that, across the board, purchasers are paying even higher multiples in 2014 than in the previous year. “In central locations and around the Alster Lakes the prices currently being paid for properties in sought-after locations are between 22 and 29 times the annual net rental income. That brings the cost of rental apartment blocks in Hamburg close to the levels seen in Munich,” remarks Ridder.
Close behind, with multiples of 20 to 24 and 19 to 25 respectively, are the desirable locations in the West and Elbe Suburbs and the good locations in Central and Alster. Grossmann & Berger’s figures for 2014 show that top prices of 4,300 €/m² of living space are being paid on the Central and Alster market, whereas 3,200 €/m² are obtainable in West and Elbe Suburbs.Central and Alster Post Highest Turnover in 2013
The Municipal Real Estate Evaluation Committee of Hamburg reports that in 2013 most sales registered in the Central and Alster section of the market were in Eimsbüttel, Winterhude and Harvestehude. The busiest sub-market in 2013 was Central and Alster, where a total of 163 sales represented a 40% share of all transactions on the Hamburg market. Following some way behind were the sub-markets East (69) and West and Elbe Suburbs (66), accounting for shares of 17% and 16% respectively. Within the East sector, the Municipal Real Estate Committee noted the highest numbers of sales in 2013 in Bergedorf, Rahlstedt and Wandsbek; within the West and Elbe Suburbs sub-market the most popular locations were Altona old town and Ottensen.Returns Still Higher than for Securities
“The current market situation is such that often the only way to achieve higher returns in the long term is to take measures that will increase rental income, such as floor plan optimization, attic conversions or investments in locations that have been less popular so far,” says Ridder
, for example in parts of the city that are progressively further away from the Aussenalster Lake. In desirable locations returns are, for the most part, a mere 2 to 3%. That has not served to depress demand in 2013, nor as yet in 2014. “One major reason is that in recent months fully let multi-family homes, despite steadily falling returns, have produced higher yields than bonds,” explains Ridder.
However, fear of inflation does not currently appear to be a motive for acquiring a rental apartment house. The majority of buyers are, as in the past, from Hamburg; an increasing number of properties are offered for sale by communities of heirs under German law.Uncertainty About How Demand Will Develop
The key factors influencing Hamburg’s market for rental apartment blocks offer grounds for optimism. Hamburg’s economy is stable, demand for homes is growing; building permits and completion dates are unlikely to have any long-term effects. But there is uncertainty about the effects of planned political interventions. “Plans to introduce ‘rent caps’ and extend the areas covered by social preservation orders could reduce the demand for rental apartment blocks,” says Ridder
. “We predict that 2014 will close with a slightly lower total of transactions. In the lower and mid-range locations we anticipate a further rise in square-metre prices, but only moderate increases, coupled with a certain sideways shift, in the top locations, as we are not expecting a large number of fresh transactions in the most desirable locations”.