The latest survey conducted as part of the Aengevelt Residential Investment Index (AWI) paints a clear picture of the current housing market situation: around 96 percent of surveyed market players expect demand for rented flats to remain high or rise further in the near future. Property company Aengevelt surveys institutional and private owners, investors, service providers, financial institutions, managers, and experts nationwide twice a year for this study. Only four percent of respondents predict a decline in demand, which is likely to be confined largely to structurally weak rural areas.
Clear trend towards upscale housing quality
The gains are concentrated primarily in the high-quality housing segment. In prime locations, 64 percent of respondents anticipate a further increase in demand, compared with 57 percent for secondary locations and 50 percent for basic locations. The basic locations segment is also the only submarket where a measurable proportion of market players, at twelve percent, anticipates declining rental demand.
Housing supply is unable to keep pace with this growth. Across all quality grades, only twelve percent of market participants expect an increase in the supply of rental flats, whilst 33 percent anticipate declining stock. The interaction of both developments results in the continuation or worsening of the existing housing shortage in many market regions. The research firm currently sees no indications of any tangible easing.
Rising rent and purchase price expectations in prime locations
The persistent imbalance is clearly reflected in rental price expectations. A total of 69 percent of market participants are factoring in rising residential rents. Increased land, construction, and financing costs, combined with growing supply shortages, are considered the main drivers. In addition, more than 90 percent of respondents expect ancillary residential costs to rise.
- —Prime locations: 75 percent of respondents expect rising net cold rents, whilst only seven percent anticipate falling rents. In terms of purchase prices, expectations of increases outweigh declines at 30 percent compared with 21 percent.
- —Secondary locations: 70 percent forecast rent increases, whilst purchase price expectations appear more moderate.
- —Basic locations: Whilst 54 percent still expect rent increases, 39 percent of respondents anticipate falling purchase prices and only 16 percent predict a price rise.
According to Dr Wulff Aengevelt, Managing Partner of Aengevelt Immobilien, actual demand is bypassing the current focal points of housing policy. Whilst debates focus primarily on the affordable housing segment, the majority of tenants demand higher housing quality. New-build activity remains subdued despite this excess demand, as regulatory requirements at federal, state, and municipal level, alongside current interest rate levels, place an additional burden on the economic viability of residential investments.
