Cities and Neighbourhoods

Still Plenty of Potential in Class B Cities


October 2019

The most attractive German cities for investments in existing residential buildings are Lüneburg, Fürth and Pforzheim. Parameters in the new-build property segment, by contrast, are most advantageous for residential property investors in Fürth, Kempten and Bamberg. These are, in any case, the findings of the latest Risk-Return Ranking by real estate service provider Dr. Lübke & Kelber. The ranking, which is updated annually, compares the rates of return that can realistically be expected in 111 different German cities with a minimum rate of return that is calculated on the basis of various risk factors. This year, the cities mentioned above topped the list with the most favourable ratios of actual rates of return versus minimum rates of return (source:

The “Big Seven” metropolises, by contrast, did not make the top ranks. Although the investment risk shows pretty much the lowest level in these, the Class A cities, the brisk rise in selling prices over the past years was matched by a proportionate hardening of yield rates. Accordingly, second-line cities offer superior risk-to-reward ratios. However, auspicious investments are still possible in mid-market locations of the metropolises as well, as the survey authors emphasise.  

Cities in Greater Metro Areas Particularly Attractive

Striking to note is that Leipzig is close to the top in the latest Risk-Return Ranking even though the Saxon city has the largest housing market in Germany after the seven top metropolises (source: In the new-build construction segment, Leipzig has the fifth-best risk-to-reward ratio of all cities examined, while placing 12th in the existing property segment. Despite the fact that Leipzig has pulled more or less abreast of the metropolitan housing markets in terms of size, it continues to offer an above-average return potential.

The survey moreover highlighted certain cities inside greater metro areas, such as Landshut, Potsdam, Darmstadt and Fürth. These cities show a low location risk more or less as low as the neighbouring metropolises while simultaneously showing a superior return potential because of the lower selling prices, or so the survey’s authors wrote.  

Strain Easing on the Overall Market

With respect to the overall market, the survey suggests that prices follow a steady upward trend. It reports that prices for existing condominiums rose by 9.4 percent year on year and by 6.8 percent for newly constructed ones. The priciest existing flats are now found in Munich, Frankfurt am Main, Konstanz, Hamburg, Stuttgart and Berlin.

Despite the price growth, the strain on the residential property market eased last year, according to Dr. Lübke & Kelber. Although several cities still showed a negative score in the 2018 Risk-Return Ranking, meaning that the rate of return to be achieved was below the recommended minimum rate of return, this has ceased to be the case in any of the cities in the latest ranking.

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