Munich real estate market: Bavarian comfort meets sporting returns
Mountains, lakes, culture and flair: The Bavarian capital Munich has many qualities — and their price. It is true that the local real estate market has also experienced an interest-related setback in recent years. However, the current situation and forecast suggest that the Weißwurst metropolis is likely to continue living up to its reputation as an excellent real estate market. Find out why Munich is a good place for investors and how retail investors can now also benefit from the return prospects.
Real estate market on the upswing in 2024
There is always speculation about a possible “bubble formation” on the Munich real estate market. For decades, prices per square meter have seen almost only one direction: upwards. Due to the rapid rise in key ECB interest rates in response to high inflation, Munich too has experienced a fall in prices in the past two years because demand has plummeted somewhat due to high loan interest rates. But in the first half of 2024, the Munich real estate market is showing signs of recovery again. On the one hand due to lower inflation and interest rates, and on the other hand because Munich is a top location for innovation and a leader in the smart city sector in Germany. This development is underpinned by latest JLL real estate market report.
Since the third quarter of 2023, the Munich real estate market has been gaining significant momentum. The share of private investors has risen to a new all-time high and even exceeded the volume of institutional investors in the first half of 2024. By the end of September, private investors had surpassed the mark of one billion euros in one year for the first time. The trend suggests that market participants are using the phase to secure core properties in prime locations that otherwise rarely come onto the market.
With a turnover of 455,000 m² by Q3 2024 and rising rents, the office market is robust. The prime rent rose to 53.50 €/m² and the vacancy rate is 6.4%. For the full year 2024, a further area turnover of a total of 610,000 m² is expected.
Demand on the housing market has tended to rise for years. So is loud Statista The offer price for condominiums in Munich rose from an average of less than 4,000 euros to around 8,000 euros per square meter in the period from 2012 to the second quarter of 2024. In the city center, prices of up to 18,000 €/m2 are even called and paid. However, a “real estate bubble” is unlikely to emerge - simply because Munich is a very attractive city whose population will grow, although the supply of housing will not be able to meet demand. This is because high construction costs and sometimes complex approval processes lead to delays in the new building. That is why the Vacancy rate on the housing market in the Bavarian capital at around 0.1% - a historic low. By way of comparison, the overall German housing market is currently around 2.8% of residential units are empty. In the long term, Munich is planning further residential areas to meet growing demand.
Perfect work-life balance
But what actually makes Munich so attractive as a place to live or as a location - apart from Bavarian comfort and proximity to nature? The Munich Real Estate Market Report 2024/2025 In this context, highlights the stability and innovative strength of the city as a business location characterized by a broad industry structure and a high quality of life. Special growth areas include high technologies such as quantum computing and artificial intelligence, which are supported by projects such as the “Munich Quantum Valley”. This innovative strength attracts large corporations and start-ups alike, which are supported by a diverse ecosystem of universities and research institutions.
In the real estate sector, Munich is seen as an expensive location, but for the reasons mentioned above, it is also comparatively resilient and has a lot of (return) potential.
Attractive return perspective
That is the Rental yield For existing apartments in the Bavarian metropolis, around three percent, while new apartments have a yield of 2.6%. In both segments, an upward trend can be observed over the past two years, which correlates with the price per square meter: In 2023, the rent index for apartments in Munich was an average Net rent of 14.58 euros per square meter on. This represents an increase of around 24.7% compared to the previous survey from 2019. If you look at the currently advertised offer rents, some of these are significantly higher than the statistical value.
According to JLL, the peak office yield in Q3 2024 was 4.15%, which represents an increase of 45 basis points over the previous year. Investors' interest is primarily focused on so-called Core and Core+ objects in inner-city locations.
Of course, private investors are often unable to raise the necessary capital to invest in Munich real estate as a portfolio component. With the project”Isar Valley!“For the first time, FINEXITY is offering its investors an opportunity to invest in the Munich real estate market — starting at just €500.
