Growth Increases in B-Cities

Pricing levels rise further in all top 7 cities, whereas migration in surrounding areas and B-cities increases population growth.

Meanwhile, Bremen surpassed Berlin – at least in regards to population growth. (Image: Ingrid Krause / BTZ Bremer Touristik-Zentrale)

In the latest empirica newsletter, 2018’s property price index III is being discussed and revealed a new trend. Both low interests and the lack of viable investment alternatives cause a different growth between rental charges and purchasing prices. For instance, prices rise in all seven A-cities (among them Berlin, Hamburg and Munich) by 11.9 or 5.7 percent, while price growth in the 14 B-cities like Hanover, Leipzig and Mannheim turns out weaker as expected with 8 or 3.6 percent.

However according to empirica, this price growth is exactly the trigger for a higher population growth in B-locations and surrounding areas of the metropolises. By now, cities like Bremen or Mainz grow stronger than Berlin, whose population increasingly starts to prefer the surroundings. In 2016 already, the capital got overtaken in this regard. Back then, migration lied at 15 percent, while the other two cities grew by an average of 16 percent.

empirica considers this development a growing and eventually bursting bubble outside of the top 7 cities. Even though reproduction and price-income-relations rise on average in swarm cities, stagnating rates of concerned circles with values beyond the “bubble-free” reference value keep the risk at constant levels for the third time in a row. This risk rises in stagnating and shrinking regions, since investors lay their focus increasingly on seemingly undervalued cities. Especially for investments in new buildings, the analysts presume a higher risk of price declines and vacancies.

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