Dienstag, 24. März 2009

Munich Real Estate

Munich appears to be one of very few cities worldwide where real estate prices are currently going up. And quite substantially so: According to recent data, residential rents have gone up nearly 10 % year-on-year, and residential property prices have risen nearly 15 %. (Germany as a whole has seen slight drops of rents and prices).

According to press reports, there is a growing sentiment among upper-middle-class households with significant savings that "paper assets" should be turned into "solid hard assets" while it's still time (i.e. before inflation takes off). If this is indeed a widespread feeling, then the Munich real estate boomlet may run for a little longer before fizzling out.

But it will inevitably fizzle out quite soon, as Munich is already by far Germany's most expensive city as far as real estate prices and rents are concerned. And while it is indeed very popular to move to Munich, and the city's population has grown in recent years (as opposed to Germany's overall population decline), there is no denying that many sectors of Munich's economy are hit hard by the crisis. Few jobs have so far been lost, but new hiring is nearly inexistent.

Who can afford to move to Germany's most expensive city if he doesn't have a well-paying job lined up? So while real estate prices may possibly increase a bit further if enough investors are worried about inflation, rents are bound to edge lower quite soon.

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