PROGEDO presents: Hannover
Hanover’s real estate market
Hanover is remarkably beautiful…
… and sadly prices are rising remarkably to reflect it. In areas like Zoo, Oststadt or List (image above), real estate prices surged by as much as 15 to 20 percent. Lower-Saxony’s capital also cannot resist the trend of ever-increasing prices in urban real estate. Previously, only dentists, lawyers and well-off master craftsmen from close by would invest in housing. Today, foreign investors take an increasing interest in Hanover after having overrun cities like Munich, Frankfurt and Hamburg; financiers from Austria, Luxemburg and China are an increasingly common sight. The city’s cosy local atmosphere is a thing of the past.
New construction is practically dead since the year 2000
After 1999 and 2000, years in which the Hanover World’s Fair had somewhat vitalized new construction, no significant projects were completed. Especially between 2008 and 2011 construction nearly dropped to zero. This had a devastating effect on prices as demand remained high. Hanover’s projected growth until 2030 lies between two and six percent – a clear signal for the city to provide its inhabitants with additional housing space as part of its “Wohnkonzept 2025” (‘Living concept 2025’) initiative. Towards this end, the city re-purposes as much land as possible. “Every bit of free space is being used: former schools, hospitals or petrol stations; everything is being transformed and revalued”, a real estate agent comments on the initiative.
Around 1.12 million people live in the Hanover metropolitan area, 520.000 of which within the city boundaries. Yet, despite high influx, only 8.000 new apartments are planned until 2025 – an average of below 1000 apartments per year and not nearly enough. In light of this, rent increases are likely to remain at dire levels. In 2014, average rents per square metre were at €10 and at €14 for new buildings.
Living in the centre becomes increasingly popular
Living in the city is as popular as it is in all other German cities: at Klagesmarkt, Hohes Ufer, Marstall and Köbelinger Markt new urban neighbourhoods that combine living, working and gastronomy are emerging. The construction companies Hochtief Hamburg (western plot) and STRABAG (eastern plot) are commissioned to build for the mixed usage at Marstall, albeit with the main focus on living space.
At the southern part of Klagesmarkt, seven buildings that will consist of a total of 100 flats are under construction. The communal real estate company GBH is the investor and, from 2016, will use a seven-floor office building embedded into the complex. 20 percent of the housing space will be offered as publicly subsidized affordable housing – unfortunately a mere drop in the bucket. At List’s marina, Gundlach housing company are building 60 owner-occupied flats. The area is just a short walk away from the Mittelland canal. With all these new constructions, their rent potential is going to be fully exploited.
When construction can’t keep up – repurposing offices into housing
A repurposing of office space into housing space is being considered. Close to the Eilenriede urban forest, insurance company HDI’s former offices are being transformed into 80 flats, partially to be owner-occupied. The same might happen with the Bredero high-rise building; plans testify to sufficient space for 120 flats. A bit further out, in Wettbergen, about 300 non-detached, semi-detached and detached houses are being built as climate-friendly passive houses. Slowly things are moving in the right direction.
Also, the availability of old houses is good, compared to many other German cities. Furthermore, a good supply of kindergartens, schools and public transport ensures a high quality of life, especially for new inhabitants.
The market allows for it: high purchase power means landlords can raise rents
People can still afford surging rents: Insurance companies like Hannover Rück and Talanx are well-paying employers, and Volkswagen’s commercial vehicle construction is also located in Hannover. The city’s fair is also among the major employers of the region. This results in above-average purchase power. Consequently, a rent increase from € 5.50 – 8.50 to € 6.50 – 11 within two years rarely caused significant distress. Yet the share of income spent on accommodation continually rises for all.
8,000 flats until 2025 will not suffice to calm the market, let alone make rents stagnate. Most new constructions are reserved for wealthy buyers. “There’s always somebody willing to pay more”, as real estate consultant Timo Lietz of Planthome puts it. Rents are expected to rise at between two and five percent per year.