German residential rents have risen over the past 10 years despite an increase in building permits and completions of new living space across the country.
The finding is included in a report by Empira, the Swiss investment manager, which also reveals that the employment market offers the strongest correlation to rental growth and that wage growth has a minimal effect on rents. In compiling the report, Empira studied the impact of 11 different factors on residential rental growth in 80 major German cities, including population levels, GDP, disposable income, gross salaries, prices for condominium apartments and vacancy rates.
Professor Dr. Steffen Metzner, head of research at Empira, said: “We have tested a wide range of potentially influential factors. In particular, locations with positive developments on the employment market are registering rising rents after a short time. One factor is higher purchasing power, while another is the search for housing in proximity to work. Even if new sectors tend to hire highly qualified staff who are looking for housing at the high end, trickle-down effects also help other locations and price brackets on the market. If construction activity also increases, more living space does not necessarily lead to falling rents.”
Lahcen Knapp, CEO of Empira, explained that the company wanted to provide reliable statistics and identify correlations in order to make sound and sustainable investment decisions within the residential sector.
“Correlation does not necessarily mean causality, but the results are extremely interesting,” said Knapp. “That a robust employment market plays a key role in rent levels may come as less of a surprise. However, the positive, albeit low correlation between local construction activity — such as building permits or completions — and rents contradicts conventional expectations.”
