A Munich housing shortage keeps property demand high

So we move to Munich, which according to Heinrich Heine some 150 years ago “Nestles between art and beer like a village between hills.” With the advent, of the World Cup 2006 my guess is that more beer is the order of the day than art.

Munich’s stunning €280m Allianz Arena (shared by Munich’s rival teams Bayern and TSV 1860) is one of five new stadiums built for the World Cup after a referendum rejected plans to refurbish the old stadium and brings shame on the UK’s prolonged attempt at Wembley. Located to the north of the city, the three-tiered ground, offers football fans a spectacular venue with a facade made up of nearly 3000 panels that light up at night in a variety of colours, when it will host the tournament’s semi final on 5 July.

Since hosting the 1972 Olympic Games, Munich has secured its place as one of Europe’s most important sports cities. The magnificent Hofbräuhaus beer hall is the setting for oktoberfest where punters can enjoy the infamous Augustiner beer complimented by sausages in all shapes, sizes and colours is a major tourism draw.

Bavarian tradition remains present alongside history, art and culture and the reason that Munich is increasingly being favoured by young Germans seeking its attractive standard of living and an appealing place to call home. Here great history sits comfortably alongside clean, modern development and in recent times the city has experienced a rebirth with an influx of high-tech companies enticed by Bavaria’s ruling party, the Christian Social Union (CSU) promotion of Munich as an investment hub. In addition, the solid blue chip companies such as Siemens and BMW have given Munich a reputation as one of the most productive cities in Germany keeping employment figures strong. Situated at the heart of Europe, the Bavarian capital enjoys a favourable location at the intersection of the region’s West-East and North South trade routes and within easy reach of Europe’s key business metropolises. 75% of the population work in the service sector which dominates industry structure accounting for 72% of Munich’s GDP whilst manufacturing makes up approx 21.6%. Continued business infrastructure investment has resulted in a major project which further expanded the exhibition centre in Riem adding a media centre and more than 15,000 m2 extra covered exhibition space.

Munich has a population of around 1.2 million people of 23% are foreign residents principally from other EU countries. However in 2005 alone, according to the Statistische Landesamt, Munich’s population rose by 38,000 with the majority of the newcomers coming from within Germany lured by the city’s relative prosperity. Munich has not escaped the clutches of a sluggish economy but with the lowest unemployment figures for major German cities, the City of Munich still remains one of the regions with the strongest purchasing power in Germany (Source: Consodata Marketing Intelligence GmbH).

Unemployment rates in major German cities, 2002
Labor Office constituencies; annual averages; all employable persons in the civil sector
30.06.2002

Source: Federal Labor Office

Offering a superb infrastructure, Munich’s network of eight freeways, a tightly woven network of rapid transit trains, subways and streetcars has contributed to the city’s success as a strong business and residential location. In June 2003 the recently extended airport north of the city now ranks among the top ten airports in Europe to become one of Europe’s busiest civil aviation hubs, 23.2 million passengers passed through its terminal buildings in 2002 with predicting of this number rising to around 40 million by 2010.

The real estate market in Munich remains competitive as affordable accommodation remains in short supply, despite a growing population and lack of housing the number of new apartments built each year has not risen in the last half decade with little prospect of improving. Demand for good rental accommodation is high resulting in Munich having the highest €/m² per month rents in any German city at just over €12/m2.

Housing rents in German cities
First-time rents, newly built accommodation, good residential location

Source: Ring Deutscher Makler (German Estate Agents’ Association)

From a property investment perspective this can only bode well. An ideal scenario of housing demand, a building shortage of new property and a desire to live in Munich, despite it being costlier than other German cities points to Munich being a good german property tip.