Get a more detailed overview of the city you are interested to invest. Rather than just looking at the city as a whole, go that bit deeper. Look at the different districts, look at the property prices and how they have been impacted by changes i.e gentrification that has taken place in the last years. This could be a good indication of the impact on the prices for the future.
A good indication of how realistic the property prices are, can be gauged on how long properties stay on the market before being sold. When properties are slow to sell , this could indicate room for negotiation! When properties are moving quickly, then you have to move quickly too!
Macroeconomic data can also provide some valuable information, particularly when you are looking at it from a ‘supply /demand’ perspective. Comparing the number of households in the district and the number of housing units available, is a good indicator how the property prices could develop. When the demand is higher than the number of properties available on the market, prices will rise.
The age of the inhabitants in a district will certainly have an effect on the property prices. Districts with a younger age group, those finishing their studies starting new jobs, starting families etc create a demand for cafes , restaurants, entertainment outlets, kindergartens, organic markets etc enabling new businesses for flourish. This in itself creates a further demand as more people want to be part of this and so, is then reflected in the property prices. Back to the supply/demand.
When a district has a healthy employment rate, therefore a stronger purchasing power, this will undoubtable have a more positive effect on the future potential for property.
The average net income in a district to some degree can be related with the employment status, but of course, a lower net income district with a high employment rate with young residents could also become a future area for development. Sometime we also have to take a longer term view.
By considering the number of people per household in a district, this will help determine which district best match with your requirements and investment strategy. Buying a 3 room apartment for a family could also work well for student sharing accommodation, if there is a high student presence in that district and the demand is there.
The City of Leipzig is reacting to this trend by shifting its principal focus to new residential construction to meet the growing demand for living space. Where fewer than 900 building permits were granted in 2014, the figure for 2018 was 3,550. The number of new residential completions was also significantly higher in 2018 than in 2017 at 1,928. Large disused industrial sites in particular offer the opportunity to create contiguous new development zones. Examples include the Lindenauer Bahnhof and Eutritzscher Freiladebahnhof (former railway holdings). There is also potential land available at the Bayerischer Bahnhof railway station. Considering the rapid increase in the number of building permits granted and existing space potential, construction activity is expected to remain high in the coming years. The reduction in the vacancy rate, absorption of renovation potential and strong expansion in new residential construction are also reflected in price trends in the city’s housing market. Various housing policy instruments were adopted by the City of Leipzig in 2018 to guarantee the provision of sufficient affordable living space over the coming years. These include the tightening of rental cap limits: for example, existing rents may only increase by a maximum of 15% within three years from 2020. The second approach is the introduction of a qualified rental index and enforcement of neighbourhood protection regulations in some parts of the city to prevent disproportionate modernisation programmes.
Despite strong rent rises in recent years, the pace of rental growth in Leipzig has slowed down again recently. At €7.10/ sqm/month, the average rental price level in the first half of 2019 was around 1.4% above the previous year’s figure, yet significantly below the 5-year average growth rate of 5.4% per annum. There was a stagnation in prime (€10.00/sqm/ month) and new-build rents in particular, while the lower rental price categories continued to show strong growth of around 4.6%. Although a certain level of saturation has been reached in the prime segment after years of strong rent rises, the catch-up process continues in the lower rental price categories and peripheral locations. In an analysis of submarkets, there have been strong rental price rises, especially in the peripheral districts to the northeast and south. However, given the rapid reduction in the volume of vacancies and the dynamic population growth, significant rental price rises can be expected across all rental price categories over the coming years.
There is sustained momentum in the market for condominium apartments in Leipzig, although a slowdown is being observed. The average purchase price for a condominium apartment has reached €2,150 per sqm, 5.9% more than during the same period last year. Leipzig remains the top location among the Big 8 in terms of purchase price growth, recording a 5-year average of around 11% and with an increase of more than 19% compared to the previous year, the strongest price rises were mainly observed in the lowest purchase price categories. Conversely, prime purchase prices (€4,250 per sqm) increased by 4.7% compared to the previous year, significantly below the 5-year average. Due to the reduction in vacancies, demand is shifting increasingly to peripheral and previously relatively inexpensive neighbourhoods which are now catching up in terms of price trends. Particularly strong increases can be observed, for example, in the northwest, but also in the west of Leipzig and south of Grünau. The persistently high demand will ensure that localised catch-up processes, especially in peripheral locations, are likely to occur in the coming years.
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Senior Financial Consultant
Rico is a globetrotter and loves to get in contact with people from all over the world. Take advantage of his excellent English language skills to get his support for all your property financing questions. Rico knows the real estate market of Leipzig and helps you to realise your mortgage fast and smoothly.
Senior Financial Consultant
Like Rico, Alexander also likes to travel to the most remote regions of the world. With his excellent skills in English, he will help you understand all the topics related to your real estate financing.