New Market Survey Rental Apartment Houses

2019 price to earnings multiples of up to 39

Press release | Hamburg

Currently the maximum price to earnings multiple* for apartment blocks in a normal state of repair which are let at normal market rates in the preferred parts of Hamburg is 37 times the annual net rent excluding service charges. Research for G&B Price Trend indicates that the maximum multiple will rise to 39 in 2019. “In isolated cases we are already seeing higher multiples in the best parts of Hamburg. Especially when investors buy rental residential property for the purpose of dividing it into condominiums, or where the current rents are particularly low,” says Axel Steinbrinker, managing director of Grossmann & Berger. Consequently, considerable interest in rental apartment properties persists. At the same time, increasing numbers of owners are considering a sale. Steinbrinker adds that, “Prices will therefore not rise as steeply as in the recent past. It is likely that the market is approaching its peak. From that points of view, this could well be the right time to sell an apartment house.” Grossmann & Berger publishes its market findings for Hamburg today in its Market Survey on Rental Apartment Houses/Buy-to-let Investments 2018/2019.
Once again multiples have grown strongly in all locations
The obtainable price to earnings ratio is a continuation of the upwards trend seen in recent years. In all parts of Hamburg the minimum and maximum multiples rose in the period 2017 to 2018. In 2017 the maximum price to earnings ratio for an apartment house was 34; now, in 2018, it has risen to 37. This top figure can be attained for multi-family homes and apartment blocks with sitting tenants in the preferred parts of Hamburg around the Alster lakes and in HafenCity. Since 2014 the minimum multiples have also charted a steady upwards course. In 2017 these multiples reached factors of 18 times the annual net rent, rising to 20 in 2018. Grossmann & Berger expects to see this figure rise to 21 in 2019. Rental properties in this price category are to be found in the less desirable locations south of the Elbe and in East Hamburg.
Maximum purchase prices of €5,700/m² to be expected
A similar trend was observed for the attainable purchase prices per square metre. Whereas since 2016 the maximum purchase prices have leapt up by €500/m² at a time, the G&B Price Trend for 2019 forecasts more moderate advances by €200/m² to €5,700/m² in 2019. The forecast minimum purchase prices in 2019 are €2,100/m² of living space. Such low prices are expected for rental apartment properties in less desirable locations. A comparison of minimum prices between 2014 and 2018 reveals a rise of 100%. “This remarkable price growth is partly due to the limited amount of property available and the high prices in preferred locations. Increasingly, therefore, buyers have turned to the more modest locations which have potential and promise higher yields”, explains Steinbrinker. In the same period (2014-2018) maximum purchase prices rose by 28%.

* Price to earnings multiple: The ratio between purchase price and annual net rent, and an indicator of the gross initial yield in per cent.

Source graphics (available in German only): Grossmann & Berger GmbH
Source photo: Jenner-Egberts Foto+Film

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