It is well known that location has a significant impact on the value of residential real estate. The more established a location is, the more sought-after the properties there tend to be. This is especially true for major cities such as Berlin, Frankfurt am Main, and Munich. In large cities in particular, it’s also worth taking a look at locations on the outskirts—for several reasons.
As shown by the results of the study “How We’ll Live in the Future” conducted by the Technical University of Darmstadt and the mortgage broker Baufi24, a decline in demand for residential real estate in city centers is emerging, while digitalization is boosting demand for outlying areas and green spaces. Consequently, only about six percent of the households surveyed can imagine living in the city center in the future. This would mean that 25 percent of the people currently living in city centers would no longer want to live there in the future. The authors of the study believe that the ability to work and shop online has reinforced this trend.
Suburban Location vs. Downtown
Living on the outskirts of the city offers advantages that even the best downtown areas can’t match. Nature is close by, there’s less traffic, and parking is generally less of a problem. As a look at data from the Federal Statistical Office shows, rents in outlying areas are often significantly lower than in the city center—meaning that the burden of housing costs in downtown areas is particularly high. Young families with children, in particular, are often discovering the appeal of suburban living—the competition for daycare and school spots is often not quite as intense there as it is in the city center. At the same time, there are generally good public transportation connections, so commuters—unless they’re working from home—can easily get to work even without a car.
Trend Exacerbated by the COVID-19 Pandemic
The COVID-19 pandemic has intensified this “peripheral areas” effect—given the stressful situation involving curfews, homeschooling, and working from home, many people longed for more space and distance from one another. To investigate the extent to which the COVID-19 pandemic has influenced the housing preferences of the German population, immowelt and the ifo Institute conducted a survey of 18,000 people. They found that respondents from urban areas were more willing to make fundamental changes to their living situations. Nearly 13 percent of all respondents from major German cities with more than 500,000 residents stated that they intended to move within the next twelve months. These respondents were often young and middle-aged adults, as well as households with children.
New residential neighborhoods create community spaces for all residents
The severe housing shortage is also prompting many people to look for an apartment on the outskirts of a city. To create enough housing, it won’t be enough to renovate and densify the existing housing stock—the construction of new residential properties outside the city is unavoidable. Fortunately, these are no longer built haphazardly into the landscape; project developers take existing residential structures into account in new construction projects and integrate the surrounding area into their plans. They typically design new neighborhoods with community facilities and spaces that add value for both long-time and new residents. Thus, there’s a good chance that purchasing a property on the outskirts of the city will result in an increase in value—since rents in these areas are likely to rise over the long term as demand increases.
Properties outside major cities are popular
Accentro’s real estate portfolio also includes numerous properties on the outskirts of cities —for example, in Oschatz, Saxony, near Leipzig. The small town of Oschatz is ideal for people looking to escape the hustle and bustle of the big city. Oschatz has a charming downtown area characterized by small shops and a diverse range of dining options. There are plenty of local shopping opportunities, as well as educational and healthcare facilities. The O-Park, Collmberg, and Dahlener Heide are ideal destinations for day trips. Thanks to its proximity to the highway, the town has excellent transportation links, making Leipzig and Dresden easily accessible in a short amount of time. Given the current real estate market, we can expect places like Oschatz to become even more popular in the coming years—and for properties in such locations to appreciate in value.
