Press release

Study: Attractive yields in Eastern Germany's mid-sized cities

- For the first time, TAG's Housing Market Report 2018 analyses risk/reward profiles in Eastern Germany

- Attractive yields of 4% to 12% and comparable risk profiles to Western Germany

- Positive outlook for housing markets as vacancy rates decline

- Housing cost burden remains low, even as rents rise
 

Hamburg, 17 October 2018 - Real estate investors can look forward to yields of between 4% and 12% on Eastern Germany's housing markets. What's more, the risk profiles of many Eastern German markets compare more than favourably with Western Germany's large and medium-sized cities. In terms of risk, it therefore makes little difference whether investors acquire multi-family assets in Rostock or Düsseldorf. At 6.0%, however, gross yields in the Hanseatic City of Rostock are significantly higher than the average 4.3% on offer in North Rhine-Westphalia's state capital of Düsseldorf. Similarly, the level of risk associated with residential investments in Magdeburg compares well with the risk profiles of numerous Western German cities. Yet, at 7.8%, the average gross yield in Saxony's capital easily outperforms the yields available in Bremen or Münster, where investors have to settle for more modest gross yields of 5.8% and 4.3%, respectively. When it comes to risk, there is almost nothing to separate Eastern Germany's Halle an der Saale and Western Germany's Wiesbaden. In terms of gross yields, however, investors enjoy a 3.0-percentage-point yield premium in Halle.

These are among the key findings in TAG Immobilien AG's "Housing Market Report Eastern Germany 2018". For the third year in a row, the real estate consulting firm Wüest Partner Deutschland has analysed housing markets in 27 large and medium-sized cities in Eastern Germany, including data on demographic and economic trends, rental and purchase prices and tenants' housing costs. In a major new feature, this year's report also includes an analysis of regional risk/reward ratios from an investor's perspective.

Households up, unemployment down

"Many Eastern German regions are experiencing extremely strong economic growth, which certainly bodes well for the future and is already reflected in rents, purchase prices, private consumption, incomes and labour markets," said Claudia Hoyer, COO of TAG Immobilien AG. "Cities such as Rostock, Magdeburg and Halle have emerged as highly attractive destinations for real estate investments," added Hoyer. Between 2014 and 2016, the populations of Schwerin, Nauen and Görlitz grew by between 3.2% and 4.0%, a faster rate than in Dresden (+2.0%) and Berlin (+3.0%). Over the same period, the number of households in Freiberg, Görlitz, Merseburg, Halle, Greifswald and Schwerin increased by between 5.5% and 8.8%, compared to a more modest 3.1% and 4.2% in Berlin and Dresden.

Risk/reward profiles in 27 Eastern German cities
Please find attached the full press release with a chart "risk/reward profiles in 27 Eastern German cities".

Unemployment in each of the study's 27 cities has also declined markedly over the past six years. Döbeln, Freiberg, Potsdam, Jena, Nauen and Eberswalde now have the lowest unemployment rates in Eastern Germany at less than 6.0%. Significant population growth, an increase in households and declining unemployment are all driving wage growth - and fuelling intense demand for housing.

Rents and purchase prices continue to surge

With no let-up in economic growth in 2017, rental prices gained further ground in a vast majority of the 27 surveyed cities. Asking rents in nine markets rose by between 3% and 6% in a single year, including Stralsund, Eisenach, Weimar, Magdeburg and Jena. In six other markets (Cottbus, Leipzig, Strausberg, Schwerin, Nauen, Brandenburg), rents surged by 6-10%. In Berlin and Rostock, asking rents increased by an eye-watering 14.8% and 23.6% respectively last year alone.

Condominium prices have also maintained their impressive upward trajectory, rising by 3-6% in six markets, 6-10% in another six markets and 10-20% in Erfurt, Gera, Leipzig, Merseburg, Berlin and Waren an der Müritz. The two biggest year-on-year price increases in the existing condominium segment were registered in Rostock (+27%) and Nauen (+42%). Prices in the newbuild segment also rose substantially, with the strongest increases in Thuringia's cities and in areas around Berlin and Potsdam, where prices rose by between 15% (Strausberg and Jena) and 30% (Potsdam and Weimar). In the city of Brandenburg, prices for new apartments gained an average of 50% in just one year.

Asking rents and purchase prices in Eastern Germany, H1 2018 vs. H1 2017

Please find attached the full press release with a chart "Asking rents and purchase prices in Eastern Germany, H1 2018 vs. H1 2017".

Vacancy rates across all Eastern German regions have continued to decline as demand for housing has skyrocketed. The only markets still suffering from double-digit vacancy rates are Gera, Dessau-Roßlau and Görlitz. In contrast, the markets in Berlin, Potsdam and Jena have effectively exhausted their housing reserves as vacancy rates have plummeted to 1.1%. Housing supplies are scarce almost across the entire region as vacancy rates have declined in Dresden (1.9%), Rostock and Weimar (2.0% each), Waren an der Müritz (2.4%), Erfurt (2.5%), Greifswald (3.5%) and Strausberg near Berlin (3%).

Rents remain affordable and housing can cost less than 20% of household income

Despite dynamic rental price growth, housing remains generally affordable for Eastern Germany's many tenants. In a majority of the surveyed cities, net rents (i.e. excluding heating and utilities) now average between EUR 4.80/sqm and just under EUR 9.00/sqm. Berlin (EUR 11.85/sqm) and Potsdam (EUR 10.22/sqm) are the only two markets where average net rents have broken into the double-digit range. Correspondingly, housing cost burdens in all of the region's cities (with the exception of Berlin and Potsdam) have not risen above 20-25% of net household income. In parts of Saxony, housing cost burdens even remain well below 20%.

You can download the complete Housing Market Report Eastern Germany 2018 for free at:
https://www.tag-ag.com/en/service/downloads/housingmarketreport/

About TAG Immobilien AG

TAG Immobilien AG is an MDAX-listed company with a history stretching back over more than 125 years. The company's primary focus is on the Greater Hamburg and Berlin areas, the Salzgitter region, Thuringia / Saxony and North Rhine-Westphalia. Under the TAG Wohnen banner, TAG Immobilien AG currently manages some 82,400 dwellings, together with their associated commercial areas, garages and parking spaces. The company's goal is to constantly improve the quality of its housing portfolio for its tenants. In line with this goal, TAG develops its real estate holdings to meet modern housing requirements, participates actively in the communities in its residential quarters, and promotes a positive neighbourhood spirit. The Group continually reduces vacancies and increases the value of its total portfolio via the prudent management of its properties and the future-oriented development of its overall portfolio, thereby delivering added value and increasing returns for all of the company's shareholders.

Press enquiries:

RUECKERCONSULT GmbH
Katja Binnyus
Tel. + 49 (0) 30 2844987 41
Fax +49 (0) 30 2844987 99
binnyus@rueckerconsult.de 


TAG Immobilien AG
Dominique Mann
Head of Investor & Public Relations
Tel. +49 (0) 40 380 32 300
Fax +49 (0) 40 380 32 388
irtag-agcom