The risk-return ranking 2020 of the real estate service provider Dr. Lübke & Kelber has highlighted the cities in which real estate investments are most profitable. As a result, the so-called B-cities prevailed against the metropolises.
Purchase and rental price range is increasing
The residential property sector proved to be a safe investment even in the crisis year 2020. While commercial and hotel properties suffered losses, prices for houses and apartments continued to rise. Most investors have already lost hope of finding bargains for properties in the popular cities.
As the study ‘Risk-Return-Ranking 2020‘ by the real estate service provider Dr. Lübke & Kelber was able to point out, existing owner-occupied apartments rose in price by around 10 percent last year, while new apartments rose by 7 percent.
Urban rents, on the other hand, have remained at a rather constant level in line with the purchase price development and have hardly increased in the metropolises either. What is good for the tenant is a disadvantage for the real estate investor. Because this drives the ratio of capital expenditure to return crazy, so that investments are hardly worthwhile.
Peripheral regions become more attractive thanks to home office
The study has accordingly shown in which regions and cities the real estate investment is still profitable despite the rental and purchase price range. For this purpose, the experts created a risk-return ranking and listed the most investor-friendly cities.
As a result, properties in the so-called B cities are still proving to be quite attractive for investments. The real estate in the peripheral regions of German metropolises also shows a lucrative risk-return ratio.
Dr. Lübke & Kelber Managing Director Marc Sahling comments on the results of the study as follows: “Prosperous B-cities in the metropolitan area have the best conditions and should even be among the winners of the crisis. Because with the widespread use of remote working models, more people are willing to accept longer commutes. “
In contrast, of Germany’s seven top cities, only Frankfurt, Munich and Stuttgart are among the ten lowest-risk cities for real estate investments. “The investment risk in the metropolises has hardly risen, but B locations with good growth prospects such as Leipzig, Heilbronn and Landshut have significantly improved their risk values,” explains Dr. Lübke & Kelber Senior Analyst Dr. Stefan Behrendt in the study.
B cities are ahead
To compile the ranking, the experts looked at the purchase / rental prices and the market situation as well as the population development and socio-economic conditions, from which the risk premium could be calculated. The risk-free interest rate of 0.74 percent (return on a ten-year federal bond) was added to the respective result in order to be able to calculate the minimum return that can be achieved.
In this calculation, Landshut and Regensburg emerged as cities with the lowest risk, with Munich coming third in this category.
Pforzheim, Kaiserslautern and Lüneburg are in the first three ranks for existing properties in good locations, where a real estate investment is also worthwhile, as can be seen in the 2020 risk-return ranking, which is available from SPIEGEL. In these cities, the difference between the return on equity and the recommended minimum return is 3.38 percent (Pforzheim and Kaiserslautern) and 3.28 percent (Lüneburg).
Buying existing properties in medium-sized locations is still particularly worthwhile in Bamberg (4.43 percent), Flensburg (4.42 percent) and Kaiserslautern (4.41 percent).
Investments in new buildings in good locations are particularly worthwhile in Landshut (3.23 percent), Fürth (3.18 percent) and Bamberg (3.16 percent). Landshut (3.85 percent) and Fürth (3.82 percent) are also in the first two places in the ranking for new buildings in middle locations. Third place in this segment goes to Kempten im Allgäu with a margin of return on equity and a recommended minimum return of 3.82 percent.
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