New Market Survey Rental Apartment Houses

The business of investing in multi-family blocks with sitting tenants, i.e. in “rental apartment houses”, is booming in Hamburg. As a result, the G&B Price Trend reveals that the pertinent market parameters, the potential price to earnings multiple* and the average obtainable purchase price per square metre, have risen appreciably year on year. The maximum price to earnings multiple rose from 30 in the year 2016 to 34 in 2017. “The extreme mismatch between supply and demand and the low yield on other investments will continue to drive up the prices paid for rental apartment houses in Hamburg in the coming year. We expect to see the top multiple set a new record of 36 in 2018. However, that will not stop investors from buying into the rental apartments market in Hamburg,” concludes Axel Steinbrinker, managing director of Grossmann & Berger, in view of the main findings of the Market Survey on Rental Apartment Houses/Buy-to-let Investments in Hamburg.
 
Maximum and minimum multiples continue to soar
Maximum price to earnings multiples of 36 times the annual net rental income can, however, be demanded only for the very best locations in parts of the city near the Alster or in HafenCity. “The very low rental yields force buyers to employ more of their own equity,” says Steinbrinker. “Comparatively attractive yields are currently obtainable only on apartments let in “houses with potential” in the non-central and less sought-after locations.” The minimum multiples have increased too, although not by so much as those at the top end of the scale. These multiples reached factors of 17 times the annual net rent in 2016 and of 18 in 2017. Grossmann & Berger expects to see this figure rise to 19 in 2018. Such minimum multiples, for example, are realized for apartment blocks and multi-family houses with sitting tenants in mediocre locations south of the River Elbe.
 
Tight housing market, significant price rises
The average attainable purchase prices per square metre of living space also grew between 2016 and 2017. At the top end of the price scale properties sold for an average of €5,000/m² of living space, or 11% more than a year ago; in the lowest price bracket the figure was €1,900/m² of living space, a 12% increase. Growth rates were even more pronounced when the five years between 2013 and 2017 are compared, with increases of between +40% and +111%. “Despite the increased number of permits and building completions, the market for housing remains tight. So far, the trend towards rising rents has not been reversed. Therefore in many parts of the market for rental apartment houses in Hamburg prices have risen considerably,” says Steinbrinker. In 2018 the maximum selling price is likely to be 5,300 euros per square metre of living space, thus breaking the 5,000-euro barrier for the first time. The minimum selling price is set to rise to 2,000 euros per square metre of living space.”
 
* Price-earnings multiple: The ratio between purchase price and annual net rent, and an indicator of the gross initial yield in per cent.

Photo: Grossmann & Berger brokered this art nouveau residential and commercial property in Eimsbüttel in 2017; it is a good example of an especially sought-after investment in a top location.
Source, graphics (available in German only) + photo: Grossmann & Berger GmbH