International News: Top prices in Germany’s prime locations remain high – luxury market grows in breadth

Over recent years, the property industry has been registering conspicuous discrepancies in prices for houses in comparable premium locations in German cities and second home markets. 

A trend has now emerged from this, with the very top market prices gradually becoming increasingly close to one another. The top prices witnessed at absolutely prime addresses in Hamburg, on Sylt, in Berlin and on Lake Starnberg were sustained between 2011 and 2012. At the same time, exclusive residential property rose in value at the most desirable addresses in, for example, Frankfurt, Düsseldorf, Constance and on the island of Rügen. This is the finding of the second in-depth analysis of the luxury residential property market in Germany to be published by Engel & Völkers. “As in previous years, in 2012 we once again saw jumps in prices in certain locations that were considerable in some cases,” said Kai Enders, Member of the Board of Engel & Völkers AG, at a press conference on Wednesday in Hamburg.
The most expensively priced residential address remains on Sylt. In Kampen, on the particularly desirable “Wattseite” (the side looking out over the tidal flats), house prices reached as much as 35,000 euros per square metre of living interior. The Bavarian state capital Munich is ranked in second place. “The Seven Tower” on Müllerstraße in the Munich district of Glockenbachviertel is the highest priced residential address located within a German city, at 25,000 euros per square metre. In the districts of Schwabing and Alt-Bogenhausen, premium-quality apartments were sold in 2012 at prices that were up to 30 percent higher than the previous year. Jumps in prices of around 50 percent for top homes at prime addresses in Frankfurt districts such as Nordend-West (up to 11,000 euros per square metre) and Westend (up to 10,000 euros per square metre) demonstrate how the financial centre is not being affected by turbulence on the capital markets. An elaborate restoration project directly on the banks of the River Rhine in the Old Town of Düsseldorf marks a new prime address in the city with prices per square metre of as much as 13,500 euros. This figure is almost double what has been reached for brokered properties in the immediate neighbourhood up to now. The most prestigious residences in the Constance district of Petershausen, overlooking Lake Constance, also witnessed a price rise of some 30 percent. In the north of Germany, on its largest island Rügen, prices rose in the best locations in Binz directly on the Baltic Sea coast by around 15 percent to 8,500 euros per square metre.
Top locations are incredibly scarce: New locations witness a rise in prices

After significant price hikes in recent years, the sought-after locations for luxury properties in Hamburg and Berlin in particular saw the same price high in 2012 as in the previous year. In Berlin, prices rose from large jumps of 5,000 euros several years ago to 15,000 euros per square metre in 2011. By contrast, prices stabilised out at a very high but constant level last year. In Hamburg too, prices on the Außenalster lake (up to 16,000 euros per square metre), along the River Elbe (up to 15,000 euros per square metre) or on the Elbchaussee (up to 12,000 euros per square metre) remained at their highest level in 2012. In the south of Germany, Lake Starnberg, and specifically those land plots located directly on the northeastern shores of the lake, witnessed a price high of 25,000 euros per square metre once again in 2012. “This does not mark a stagnation in prices though,” Mr. Enders stressed. The lack of available homes and the high prices in prime locations is forcing buyers to look increasingly for properties in neighbouring districts, which is resulting in a continual rise in prices over the entire breadth of the market. In 2012 for example, prices per square metre of 10,000 euros were reached in certain micro-locations on Hamburg’s Mittelweg.
Highest standards of quality, location and appointment

Truly exceptional homes are fetching prices in some cases that are two or even three times higher than the normal market average. These prices are not representative for the entire market or for the development of prices in other locations. Besides a unique location, the quality of the property is determined by the fulfilment of the highest specifications. “Sustained top prices are only being accepted if there is nothing left to be desired in terms of location and appointment standard,” said Mr. Enders.
Spectacular new developments often meet these very high standards with a level of quality and interior fitting that is state-of-the-art. “Elaborately refitted old buildings too, that are brought up to modern standards with a high level of investment, are also amongst the most desirable kinds of property,” Mr. Enders added. Looking at Engel & Völkers sales of residential property in 2012 for purchase prices upwards of 750,000 euros, the largest proportion of these homes at 39 percent fell into the category of modern apartments with a completion date of between 2010 and 2014. A further 27 percent of sales could be attributed to freehold apartments completed between 2000 and 2009. The sale of properties dating from between 1851 and 1919 accounted for 21 percent.
Developers building on last remaining plots and creating new premium addresses

The development on the German market for residential property has increasingly pushed professional investors and project contractors to develop the last remaining vacant land plots in all locations. As a result, new premium addresses have even been created in those locations that are already heavily built up. This is true, for instance, of the HafenCity in Hamburg, the Rheinauhafen in Cologne and the Westhafen in Frankfurt. In addition to the quality of the location, the appointment and comfort of the properties meet the highest standards. In view of the growing level of demand, this will in future continue to lead to marked top prices. “This trend will be sustained into the future. If one makes a comparison with prime locations worldwide, Germany’s most expensive residential locations remain at a relatively moderate price level, despite price rises in the past,” Mr. Enders concluded. 

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