Rental Apartment Houses 2014 / 2015

2014 first year without across-the-board price rises

Press release | Hamburg

In the less expensive parts of the city appreciably more apartment houses were bought and sold on the Hamburg rental market in 2014 than in 2013. In 2013 an especially large number of let apartment buildings in preferred locations were sold. The result of this shift was that the average price per property sank to €2.18m in 2014 (2013: €2.89m) and the average price paid per square metre of living space fell to €2,101 (2013: €2,256/m² of living space).
Differentiated price patterns
“For the first time in many years, no across-the-board increase in average square-metre prices was noted in 2014. Instead, prices in the less popular areas rose by around 15%, whereas in the more desirable locations they tended to slip,” notes Andreas Rehberg, managing director of Grossmann & Berger. “In 2015 the achievable price to earnings multiples rose slightly in almost all locations, but the maximum attainable selling prices rose most in the average and modest locations.” This conclusion is set out in the property services provider’s latest market survey of buy-to-let apartment buildings in Hamburg, which is based on the firm’s own data and information from the Municipal Real Estate Evaluation Committee of Hamburg.
2014: more transactions in the south and north
In 2014 sales of multifamily homes and apartment buildings saw their biggest increases compared with 2013 in the “South” and “North” sub-markets (+23% and +10% respectively) while “West and Elbe Suburbs” and “Central and Alster” showed the largest declines (-38% and -25% respectively.) Despite this, “Central and Alster” remained the biggest-selling district in 2014 with 123 sales.
First signs of a changing tide
“The differentiated changes in price are, however, an indication that the prices paid for apartment buildings in Hamburg are reaching their limits. A shift in selling activity to properties on the periphery provides further evidence,” remarks Rehberg. “Altered market conditions are increasingly clouding the investment climate. Opportunities to make a profit have been squeezed by the introduction of the cap limiting rent increases, and the new principle of “he who orders the broker, pays the fee” has raised costs.” The freedoms of buyers and owners of apartments for rent in Hamburg could be restricted further if the areas currently under inspection are declared subject to social preservation orders.
Outlook 2015
Demand for let multi-family apartment blocks in Hamburg is nevertheless expected to stay high for the remainder of 2015 and into 2016. One reason is that there is still a lack of alternative investment opportunities. “Despite a further decline in returns, investments in residential property in Hamburg still produce a higher rate of interest than products generally available on the capital market - right now, when they add up the numbers, shrewd investors cannot afford to by-pass the apartment property”, says Rehberg. In future, one must reckon with stagnating prices and rental incomes as well as a lower volume of trades involving apartment blocks in Hamburg. “Moreover, legislators are planning to make further revisions to tenancy laws, such as reducing the amount by which tenants participate in modernization costs or new rules for the table of comparable rents.”
Hamburg market for rental apartment buildings, figures for 2014
  2014 2013 Change (%) Trend
Transactions 367 411 -11 falling
Volume of transactions (€m) 800 1,188 -33 falling
Average price per property (€m) 2.18 2.89 -25 falling
Average price per square metre of living space (in €) 2,101 2,256 -6.9 stable
Average earnings multiple 19.4 18.7 +3.7 rising

Source: Gutachterausschuss für Grundstückswerte Hamburg (Municipal Real Estate Evaluation Committee)
Photo caption: A multi-family building with sitting tenants that was brokered by Grossmann & Berger in Hamburg’s Eppendorf district.
Permission is given to reproduce the full market survey and attached photo (source: Grossmann & Berger).

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