Real estate: Where it is still worth buying - and where renting is cheaper

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Bamberg does best in the middle locations for existing properties

Photo: Nicolas Armer / dpa

For years, those interested in real estate have struggled with the high prices for houses and apartments in German cities.

And they will probably continue to do so: Even the economic crisis triggered by the corona pandemic has so far had little impact on the residential property market.

Although the market was practically idle during the first shutdown in spring, the so-called catch-up effects came afterwards: deals planned from the spring were made up for in the summer.

According to the »Risk-Return-Ranking 2020« of the real estate service provider Dr.

Lübke & Kelber the prices for existing condominiums in Germany last year on average by almost ten percent, those for new apartments by seven percent.

This means that prices rose even more than in the previous year.

"The German residential investment market could post its second-best result after 2015 at the end of the year," says Marc Sahling, Managing Director at Dr.

Lübke & Kelber.

Rents are hardly increasing any more

In contrast, rents in Germany's cities are hardly rising any more.

They tend to develop sideways.

For investors this means: the ratio of purchase prices to rents has drifted so far apart that, especially in metropolises, it is hardly possible to earn any more money with new property purchases.

The analysts at Dr Luebke & Kelber have examined in which German cities a purchase is still worthwhile.

For this purpose, the experts used numerous data from the real estate market to assess both the risk and the return for each city and then compared where the actual return to be expected most exceeded the minimum return to be achieved in view of the risk.

The evaluation is aimed primarily at professional real estate investors, but private individuals can also see whether it is still worth buying a property in their city.

You should also ask yourself whether your investment will still pay off if you want to or have to rent the property - for example if you move to another city.

The result:

,

and

, for example

,

best in

the good locations for existing properties

.

In the middle locations of existing properties,

,

and

in particular have

the best risk-return ratios.

However, that does not mean that houses and apartments in these cities are likely to generate the highest returns in the future; only the ratio between risk and return is best there, according to the analysis.

,

and

are in the lead when it comes to new-build properties in good locations

.

With the middle locations in this building class, Kempten (Allgäu) is also worth a look.

"The winners of the crisis are medium-sized and university towns around the metropolises," says Sahling.

Because people are increasingly working from home, they also accept longer commutes - you don't have to travel so often anymore.

In previous years, smaller cities performed best in the real estate experts' analyzes.

The trend that prospective buyers are increasingly looking around in so-called "B-cities" is now likely to accelerate due to Corona.

In Berlin, Frankfurt, Düsseldorf and Cologne, on the other hand, real estate is already so expensive that the expected returns are sometimes only slightly above the minimum returns recommended by the experts.

On the other hand, the risks of real estate investments there are also very low.

Of the seven largest German cities, Stuttgart is still the most attractive for existing properties.

"Properties there are quite expensive, but the bottom line is that the returns are relatively high due to the high rent level," says Sahling.

Dr.

Lübke & Kelber has been carrying out the study for several years - and the achievable returns are decreasing every year.

But even in 2020 there will be no city with a negative ratio.

The bottom line is that real estate is still suitable as a profitable form of investment.

Buy or rent - which is cheaper where?

The analysis house also examined where it is worth buying a condominium compared to renting it.

The experts have calculated how much a real estate purchase burdens the average household budget - and compared this with the burden of rental expenses.

In cities like Munich, Berlin or Hamburg, buying property is so expensive that renting is more worthwhile.

Cities like Münster, Augsburg and Freiburg also fall into this category.

According to the study, buying an apartment pays off in structurally weak cities such as Dessau-Roßlau, Gelsenkirchen or Bochum.

Here the rent leads to a lower ongoing burden compared to the purchase.

In only 35 of the 111 cities analyzed, it is cheaper in the long term

 to finance

your own 

condominium (including all ancillary costs) than to rent it.

The number of cities in which buying existing condominiums still pays off is falling rapidly.

For comparison: In 2017, buying was still more profitable than renting in 87 of 110 cities.  

This

 is even more extreme

for 

: only in five cities is it cheaper to buy a new apartment than to rent it.

This applies to

Wolfsburg

, for example 

and

.

In 106 other German cities, on the other hand, buying a new apartment is now so expensive that renting is easier to get away with.

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