Munich's Residential Real Estate Market 2018

April 16, 2018

The Bavarian capital of Munich is the richest, and one of the most prestigious and internationally most-known regions in Germany. Surrounded by lakes and having magnificent views of the nearby Alps, the South German metropolis is a unique combination of Bavarian tradition and Germany’s economic success story.

 

A city of performance

 

Munich is home to six DAX- and seven MDAX-companies*, among which well-known global corporations such as Siemens, BMW, and Infineon. Often referred to as the “Isar Valley”, the city is a permanently growing European science- and technology hotspot. Despite being the “breeding ground” to some of the leading global technologies of the future, Munich additionally offers fantastic academic and educational possibilities as two of the world’s top 100 universities – namely LMU München and TU München – are located here. In addition, also some of the EU’s leading private universities are established in Munich.

 

On average, more than 7 million tourists per year visit Munich, making it the most visited city in Germany. The Bavarian capital also has Germany’s second biggest and busiest and one of Europe’s best international airports, with numerous intercontinental flight connections. Finally, Munich was repeatedly rated as Germany’s safest big city. Given these impressive facts, it is unsurprising that the city’s population of 1.54 million is expected to reach over 1.8 million people by 2030.

 

The characteristics of Munich’s residential real-estate market

 

Speaking from the perspective of an investor, the Munich residential real estate market is extremely attractive and very likely to remain rigorously lucrative. Square-meter prices for residential property have more than doubled since 2008, and the dominating structural factors indicate that this development is going to continue. It is thus not surprising, that Munich has the highest average real-estate prices in Germany and hence especially fits wealthier buyers looking for upscale-property. Within the wider inner-city area, investors should always expect seven-figure buying prices. Although being far from cheap, however, Munich's real estate prices are far lower than in other European upscale cities such as London, Paris, Basel or Zurich.

 

Since 2008, Munich’s population has grown from 1.36 million residents to 1.54 million in 2018, with the expectation to reach 1.8 million inhabitants by 2030. As of 2018, the vacancy rate for residential property is near zero according to Deutsche Bank Research. Meanwhile, the city is already lacking approximately 40,000 residential units and is unable to meet the growing demand. As a result, newly-planned and ongoing construction projects of residential buildings are scarce and getting sold out for top prices before construction works begin. The described excess demand on Munich’s residential real estate market resulted in an average year-on-year prices growth of 8-12% for residential apartments (with and without terraces).

 

While the average income level in the city is steadily increasing, the unemployment rate of 3.7% (as of April 2018) remain exceptionally low. Around 1/3 of all employees are university graduates, while remarkably educated specialists, not only from Europe and North America but also from the emerging economies of the BRICS-states, keep migrating to Munich. In addition, Munich continues to maintain the national image of a rich and luxurious city. As a result, demand for upper-middle-class and upscale residential apartments dominates the market and will remain its tendency for the decades to come.

 

Average prices for apartments in Munich

 

Officially, the average buying price per square meter in Munich is currently estimated at around 6.500€, while the average rent amounts to 16€/m². 

However, buyers should anticipate far higher prices when purchasing apartments in Munich. In premium areas, such as the historic city centre and its surrounding central neighbourhoods (Altstadt, Lehel, Ludwigsvorstadt-Isarvorstadt, Maxvorstadt, Au), an average price level of 10.700-12.300€/m² should be expected. Adjacent, upscale- to middle-class neighbourhoods (such as Bogenhausen, Haidhausen, Neuhausen, Schwabing, Sendling, etc.), amount to 10.000-8.000€/m² on the average, while more peripheric or developing areas (Solln, Thalkirchen, Hadern, Fürstenried, etc.) cost between 7.500-5.500€/m².

 

Of course, those numbers are only indicators – in 2018, square meter prices of up to 20.000€/m² for newly constructed, selected luxury apartments are a staggering reality. 

 

Buying residential property in Munich

 

Considering the unlikeliness of rapid and extreme changes in the aforementioned structural and urban factors within the next decade, Munich is going to remain a secure, culturally and economically thriving international hub to the world. Demand for residential units will keep growing and exceeding the supply level provided by the real estate developers. Even with the often-discussed fear of potentially increasing interest rates, the described factors - the city as the economic heartland of the nation, fast-growing population, and high demands for residential spaces - and their results are likely to increase than decrease in the long-term, and should not affect mid- to long-term investors.

 

In conclusion, investors and buyers should consider upper-middle-class and upscale apartments within the inner-city area when purchasing residential property in Munich, as those objects are going to increase in its value in the future. Evidently, newly-constructed buildings are extremely interesting given their advanced infrastructure and sustainability. However, buyers need to be quick and sometimes buy several years before the actual construction work begins. Apartments in historic buildings are widely loved for their charm by tenants and buyers, especially such wishing to reside in the apartments themselves. Also, especially in the central and upscale districts, those kinds of apartments prevail or are the only ones available.

 

There are also other financially attractive investment segments on the Munich real estate market, such as upscale-student apartments, traditional & shared office spaces, as well as boarding-houses and hotels.

 

For more information, or if you plan to buy real estate in Munich and/or require assistance, please get in touch with us.

 

*DAX = German blue-chip stock index of the 30 largest German companies; MDAX = German stock index of the 50 biggest mid-cap companies.

 

 

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