by Jakob Mähren – CEO Mähren AG.
„Grow large and prosper“ – that seems to be the current trend in many East German cities, and their appeal to real estate investors is certainly growing in response. For the first time since German reunification 25 years ago, there has been more movement from the West to the East than the other way around, as shown by statistics from the Federal Institute for Population Research. In the early 1990s, approximately 200,000 people from Eastern Germany relocated to the West every year. That number even grew at the beginning of the 2000s. On the other hand, the number of people moving from the West to the East barely reached half that amount, only climbing above 100,000 for the first time in 2014. Today, after years of haemorrhaging citizens, population numbers in East Germany are climbing again. But which regions benefit most from this influx? Population growth is mostly happening in attractive urban areas, featuring outstanding universities low cost of living and relatively low rent.
This change in development of the East German population was already starting to become evident in 2012: At that time, the five new states of the republic noticed an influx of people both from other parts of Germany as well as from other countries. This was shown by a study of the Berlin Institute titled “On the move in the East”. The Institute documented all in- and out-migration in 2,695 East German communities from 2008 to 2013 and analysed its effect on the demographic situation in both urban and rural areas. The study further shows that the benefits of these changes are mainly felt in medium to large-sized cities. Particularly young people between the ages of 18 to 24 seem to gravitate towards East German cities but even so‑called Best-Agers are keen to make a fresh start there. Some individual rural areas in Brandenburg, Mecklenburg-West Pomerania and Saxony also enjoy great popularity.
Particularly the significantly lower cost of living and rent in the East provide incentive for a move – especially for the older generation hoping for a larger share of their pension once all the bills are payed. This is also supported by the latest F+B rent index. Where the average rent in large German cities was 6.39 Euro, the figures in East German cities stayed well below that. However, the index also shows a steady increase in rent prices even outside greater metropolitan areas in the East. Buying prices on real estate are still relatively low, giving high potential for future value gain.
Considering both the population growth and favourable conditions for both buying and renting properties in East Germany, and given the overcrowded Top-Cities in West Germany, property investments in the East are very promising.