PROGEDO presents: Hanover

Hanover real estate market

Hanover is so beautiful…

...and unfortunately, they've also become so expensive. In Zoo, Oststadt, and List (photo above), real estate prices have risen by 15 to 20 percent in just a few years. Even the capital of Lower Saxony can't buck the trend of rising prices. While houses and condominiums were previously purchased as investments only by dentists, lawyers, or well-off master craftsmen from the region, foreign investors, after descending on Munich, Frankfurt, and Hamburg, have now also landed on the banks of the Leine. Austrian, Luxembourg, and Chinese investors and investment companies have been sighted more and more frequently since then. In Hanover, you're definitely no longer alone.

Since 2000, new construction has been practically dead

After 1999 and 2000, when Expo 2000 did provide some stimulus for housing construction, no significant completions were recorded. New construction fell to virtually zero, especially between 2008 and 2011. This had devastating consequences for purchase and rental prices due to unbroken demand. Hanover is expected to grow by two to six percent by 2030: a clear signal for the city, too, to set an example in providing the population with housing with the "Hannover 2025 Housing Concept" initiative. To this end, the city is making space available and repurposing it wherever possible. "Every gap is being used for this purpose: former schools, hospitals, or gas stations—everything is being converted and upgraded," commented one real estate agent on the initiative.

The Hanover region has approximately 1.12 million inhabitants, 520,000 of whom live in the city. However, despite a significantly higher influx of residents, only 8,000 new apartments are planned to be built by 2025. On average, fewer than 1,000 apartments are built in Hanover per year – far too few. Therefore, the signs for rent prices continue to point to a storm. Rents for new rentals were around €10.00 in 2014, while for new buildings, they are approaching the €14.00 mark.

Living in the center is becoming increasingly popular

As in all German cities, living in the city center is a trend: New neighborhoods with a mix of residential, services, and restaurants are being built at Klagesmarkt, Hohen Ufer, Marstall, and Köbelinger Markt. The companies Hochtief Hamburg (western property) and STRABAG (eastern property) are active at Marstall and are planning a mixed-use development with restaurants, retail, and offices, but with a focus on residential use.

100 apartments are also being built in the southern part of Klagesmarkt, spread across seven buildings. The investor is the municipal real estate company GBH, which will occupy a seven-story office building embedded in the complex itself starting in 2016. Twenty percent of the apartments are to be marketed as publicly subsidized housing. Unfortunately, this is a drop in the ocean. Gundlach is building 60 condominiums in an attractive location at the Lister Yacht Harbor. The neighborhood is just steps away from the Mittelland Canal. With all these new buildings, however, it's safe to assume that the achievable cold rents will be fully utilized.

Where new construction is no longer sufficient – conversion of office space into residential space

The conversion of office space into residential space is also being considered. Near Eilenriede, the former headquarters of HDI Insurance in List is being converted into 80 rental and owner-occupied apartments. The Bredero high-rise from the 1970s could also follow this example. Plans indicate that it could accommodate up to 120 additional apartments. Further out in Wettbergen, around 300 terraced, semi-detached, and detached single-family homes are being built using climate-friendly passive construction methods. Some progress is already being made.

Furthermore, the availability of older buildings in the Lower Saxony metropolis is good compared to many other German cities. Furthermore, the supply of kindergartens, schools, and public transport connections is very good, which promises a high quality of life, especially for newcomers to Hanover.

The market allows it: High purchasing power allows landlords to increase rents

The rising rents are still being paid: Insurance companies like Hannover Re and Talanx are attractive employers, Volkswagen is represented with its commercial vehicle production, and the trade fair is also one of the largest employers in the region. This results in above-average purchasing power. Thus, the rent increase in just two years from €5.50 to €8.50 per square meter to today's €6.50 to €11.00 led to real hardship in only a few cases, but the proportion of income spent on rent is steadily increasing for all households.

8,000 apartments by 2025 will not be enough to calm the market or even ensure stagnating rents. Most new buildings are reserved for a wealthy clientele. "There's always someone who will pay even more," says real estate consultant Timo Lietz of Planethome. Rents will continue to rise: by two to five percent per year.