From an international vantage point, Munich is Germany’s most expensive city,
even though valuations are understandable. According to Numbeo 2, house
prices per sqm outside the city centre amount to EUR 6,370 in Munich, which
makes the city the seventh most expensive in Europe. Geneva, Zurich, Basel,
London, Paris and Lausanne are ahead of it. At the end of 2016, Munich ranked
14th, at EUR 5,340. The euro appreciation is one reason Munich has moved up
on the list.
Bulwiengesa confirms the significant uptrend in prices. In 2017,
prices for terraced houses and for apartments were up c. 8% yoy and c. 12%
yoy, respectively. Current construction activity does not suggest that the uptrend
in rents and prices will come to an end anytime soon. Price pressure looks set to
remain strong in the medium to long term. According to the city administration’s
current planning forecast (as released in May 2015), the population is likely to
rise by 150,000 people to more than 1.7 million by 2030. This translates into
75,000 new residential units. Seeing that there is already a shortage of 40,000,
more than 100,000 new residential units would need to be built by 2030.
However, with only 8,500 residential units planned to be completed each year,
residential space will likely remain in short supply until 2030.
If the forecast
materialises, Munich will be more obliged than any other German city to rethink
its current development policy. At the moment, the administration is not focused
on promoting construction, but on developing stricter regulations. In mid-
December, a new ordinance entered into force prohibiting any wrongful use of
residential space and enabling the city administration to levy fines of up to EUR
500,000. In this context, residential space is considered to be “wrongfully used”
not only if it is used for commercial purposes or as a holiday home, but also if it
is vacant for more than three months.
However, these measures are likely to be
insufficient in view of the sheer size of the problem. Construction activity in
Munich is simply too sluggish in comparison to population growth, which is why
Munich looks set to become even more expensive. According to Numbeo, sqm
prices outside the city centre already amount to more than EUR 7,000 in
London and several Swiss cities.