LB – BND – April

Eastern Germany Cities Offer Strong Rental Yields

Eastern Germany

Cities in Eastern Germany are offering strong rental yields according to the latest housing market report Eastern Germany 2017 from real estate company TAG Immobilien AG.


Eastern Germany cities are enjoying increasing population influx, higher purchase power and rising demand. Causing increases in property values, but even higher increases in rental prices.

Population Growth

Each of the 27 cities and towns in Eastern Germany analysed by the report showed an increase in population in 2015.

With the increase in population naturally comes an increase in rental demand, and due to this demand increase rental prices have risen significantly as well.

Most cities and towns enjoyed double figure percentage increases since 2012, most notably Berlin with a 33.4 per cent increase and Leipzig at 25 per cent.

Affordability

Despite rental and purchase prices rising, it seems that the residents of Eastern Germany can afford it.

In two-thirds of the analysed cities the housing costs compared to resident wealth even decreased between 2006 and 2017. The main reason is the higher purchase power of the residents. A powerful job market leads to sinking unemployment and higher wages, whereby the population is able to afford higher rent and property purchase prices.

Leipzig – The Young Pretender

Leipzig is growing as no other city in Eastern Germany, apart from Berlin. In addition, the population is getting younger and younger.

Due to the population influx, particularly of young families, the average age in Leipzig reduced by 1 year to 42.8 years since 2011.

The economic growth of Leipzig is exceptionally positive as the unemployment rate decreased by 29 per cent since 2010 according to the housing market report.

Therefore, although rental prices strongly rose in Leipzig, the housing cost quota decreased by 0.1 per cent to 22.9 per cent in total since 2006. In comparison, Berlin has a housing cost quota currently at 31.6 per cent and in Potsdam it is 29.2 per cent.

High Rental Yields

The housing market report also focussed on gross yields for residential property investors.

The highest gross yields were found in mid-sized towns whereby Görlitz came out top with an average rental yield of approximately 11.8 per cent. But even metropolises such as Leipzig (4.8 per cent), Dresden (5.3 per cent) and Berlin (4.5 per cent) offer investors solid future yields.

Overseas property investors might want to take a closer look at cities and large towns in Eastern Germany, to make the most of their investment funds.

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