Real estate jewels: Smaller university cities attractive for investors

Lüneburg: Popular and comparatively cheap university city for real estate investors

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University cities in this category in particular are very interesting for capital investors due to their high development potential. The real estate service provider McMakler took a closer look at this market and compared the purchase and rental prices of a total of 46 C and D cities with at least 7,000 students for 2019 in order to determine the purchase price-rent ratio.

So far, a purchase price factor of around 20 to 24 was considered a good indicator to buy. In the A-cities, however, this only applies to a limited extent. Rather, properties are already being traded at more than 30 and even 50 times the annual net rent. The phenomenon of metropolises can also be observed marginally in smaller university cities, but the majority of locations are with moderate prices and interesting opportunities for returns.

First of all, it is striking that the purchase prices in the analyzed cities are not yet running away from rents as much as is the case in German cities. Of the 46 locations analyzed, 25 are below a purchase price factor of 24, five are even below 20. The bottom lights include Saarbrücken, Chemnitz, Kaiserslautern, Wuppertal and Siegen, where property buyers have to calculate an average of 16.65 and 19.46 net annual rent for home ownership on average. Chemnitz is in last place with 1,151 € / m² in purchase prices, while the square meter prices of the other four cities mentioned level between 1,556 and 1,696 euros. Rents are in Saarbrücken at € 8.26 / m², in Kaiserslautern at € 7.86 / m², in Wuppertal at € 6.81 / m² and in Siegen at € 7.26 / m².

“The real estate boom is fueling square meter prices in the A and B cities for the eleventh year. The return opportunities are exhausted in many places. It is only logical that investors are increasingly looking at individual C and D locations with universities. We recommend concentrating on the good residential areas there as well, in order to benefit from long-term increases in value, ”says Lukas Pieczonka, founder and managing director of McMakler.

Particular attention should be paid to the larger group of cities analyzed with a purchase price factor between 20 and 24, which is therefore recommended for a property purchase. At least 20 locations are included, including extremely attractive small towns such as Lüneburg with an average property purchase price of € 2,781 / m² (rent € 9.71 / m²), Jena with € 2,680 / m² (rent € 9.37 / m²), Trier with 2,723 € / m² (rent € 9.55 / m²), Göttingen with € 2,575 / m² (rent € 9.77 / m²) and Greifswald € 1,923 / m² (rent € 7.58 / m²).

“But Frankfurt (Oder) also deserves attention with a purchase price factor of 20.76. At 1,443 € / m², property prices are cheap compared to the rest of Germany and Frankfurt (Oder) also has a lot of potential as a university city. In the student district around August-Bebel-Straße there are many leisure options, events, bars and restaurants, ”says Pieczonka from McMakler, adding:“ It is also just a stone’s throw to the neighboring Polish town of Słubice. Forward-looking, both cities are already cooperating as a European twin city in many joint projects. Berlin can also be reached quickly in just one hour by train. ”

The cities with a value between 24.05 and 29.89 are slightly above the ideal purchase price indicator, but still worth mentioning. These include urban pearls such as Ulm with a price per square meter of 3,540 euros, Lübeck with 2,834 euros, Aachen with 2,806 euros as well as the second and third most expensive cities in the purchase price ranking, Heidelberg with 4,264 euros and Freiburg im Breisgau with 4,209 euros. It is striking that with an average purchase price of a moderate € 2,183 / m² and a rent of € 7.39 / m², Erfurt is the only eastern German city in this group. The purchase price factor in Erfurt is 24.61.

East German university cities are underestimated

“Many underestimate the university cities in eastern Germany. They are often better than their reputation. Erfurt, Greifswald, Jena or more well-known cities such as Rostock and Potsdam are good examples. In recent years, historic buildings have been extensively modernized and their old towns have become increasingly attractive. Restaurants, cafés, markets, charming alleys and busy promenades attract numerous visitors – and also students who often stay in these up-and-coming locations after completing their studies, work and start a family, ”says Lukas Pieczonka from McMakler.

In total, only three of the 46 C and D university cities analyzed break the purchase price factor of 30. These include Constance with 30.34, Potsdam with 32.47 and Rostock with a whopping 36.30. While Rostock calls an average of € 3,176 / m² for purchase properties and € 7.29 / m² for rental prices, prospective buyers in Constance have to dig very deep with € 4,906 / m² and in Potsdam with € 3,938 / m². Rents here are € 13.47 / m² and € 10.11 / m².

The ratio of purchase price to rent should not always count as a purchase criterion

“In general, of course, the lower the purchase price-rent ratio, the more profitable it is to buy property. However, prospective buyers and investors should bear in mind that the calculated factor is always only a snapshot. Therefore, a purchase in Rostock, Potsdam and Constance with a value of over 30 is not inevitably advised, ”says the real estate expert from McMakler. “In addition, a development like that in larger university cities like Leipzig is also conceivable for the smaller cities. It is important to tap all individual indicators of the targeted property, including the location. Real estate experts and brokers provide specialist know-how here. “

Absolute leaders when it comes to high purchase prices are after the McMakler investigation still west German university locations. But East German cities are catching up significantly in some cases. In addition, prospective buyers can still find prices here in the medium and low segments, and the purchase price-rent ratio is also rather low in most locations, which makes an investment in home ownership worthwhile.

Photo: Shutterstock

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