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Munich is well established as the business capital of southern Germany with seven DAX-quoted companies based there and regular strong showings in Mercer’s Quality of Living index, which assesses financial stability, infrastructure and connectivity in 220 cities worldwide. Munich has been fourth for two years in a row.
A tour of the city soon reveals why. From its inner core of medieval buildings, wide 19th-century avenues radiate out towards manicured residential districts. There is an air of affluence and comfort among its 1.45m residents. The city’s 5.6 per cent unemployment rate is relatively low, there are 90,000 students in sought-after universities, and the underground service is cheap and efficient.
Estate agent Knight Frank says the average value of high-end homes in Munich (defined as those priced above £1.7m) rose 9.3 per cent in 2012, outperforming even London. Yet in absolute terms it is much cheaper than the UK capital: average high-end Munich homes fetch €4,000 per sq metre, half that of Westminster and 40 per cent of Kensington.
Even so, Munich is Germany’s most expensive city, outdoing Frankfurt (with an average €3,050 per sq metre) and Berlin (€2,170 per sq metre). This is partly because stock is low. In 2012 just 229 family houses were sold, 18 per cent down on 2011, according to the report Gutachterausschuss München, compiled by city valuers.
“The vast majority of homes are apartments so when houses become available many buyers are interested. Immediately it’s a sellers’ market. Houses can sell in days or hours,” says Markus Riedel of Riedel Immobilien, a high-end estate agency.
One of the few areas with large numbers of town houses is Nymphenburg, 15 minutes’ drive from the city centre. Riedel Immobilien is selling a five-bedroom, 4,200 sq ft house, replacing a 1970s home, for €4.4m. “There’s been substantial Russian interest in this home,” says Riedel.
Another favoured location for foreign buyers is Herzogpark, northeast of the centre. Houses on the area’s two main streets – Mauerkircherstrasse and Pienzenauerstrasse – are highly customised: buyers favour old homes needing major renovation or demolition. Here a 5,000 sq ft house, completed a year ago, was recently let for €15,000 a month – a Munich record.
Other popular areas are Altstadt-Lehel, two merged historic quarters, and Maxvorstadt, which has connections to three subway lines. At Schwabing, an artistic quarter in northern Munich, a 277 sq metre three-bedroom flat is selling through Von Poll Immobilien and Christie’s International for €2.8m. Southwest of the city, Gauting, a former holiday resort with late 19th- and early 20th-century homes, has been subsumed into Munich’s commuter belt but has a country feel with larger gardens and plots. Here a 4,700 sq ft seven-bedroom art nouveau house is being sold through Knight Frank for €2.9m.
But the strength of the sales market has created problems in the lettings sector, despite just 25.1 per cent of the city’s homes being owner-occupied with almost everyone else renting privately or from housing co-operatives or local authorities.
In 2012 German institutional investors reportedly paid €2.3bn for GBW, a listed portfolio of 32,000 apartments in Munich and parts of Bavaria. But consultancy Jones Lang LaSalle says this kind of deal may not be repeated in future. “Insurance companies and pension funds were attracted as a safe investment when the city produced yields of 4 or 5 per cent. But now Munich’s yields are 2 to 3 per cent but Berlin has 4 to 8,” says Julius Stinauer of Jones Lang LaSalle.
Munich’s attractiveness to lettings investors is further threatened after a call by politicians to extend controls on rents and expand tenants’ rights.
Investors rely heavily on capital appreciation, rather than yield, and in recent years they have not been disappointed. The Gutachterausschuss München report shows average sale prices across the city have risen for six straight years. This has provoked fears of a bubble. “Other German cities have appreciated less, so some say we’re at the top of the market. But if Munich is a world city, compare it with London, New York, Paris. Then it suddenly looks good value and sustainable,” says Markus Riedel.
Certainly, Germany’s reputation as an economic safe haven is exemplified by Munich’s business-friendly nature, its efficient airport and smooth-running public services. “Munich’s hospital and medical facilities are on a par with London’s Harley Street. In recent years this has generated interest from Middle Eastern buyers,” says Knight Frank’s Alex Koch de Gooreyend. He says five per cent of buyers spending €1.95m or more are from overseas. Most want to be near the city centre.
But Munich lacks a central international school and its planning regime restricts city centre towers so there is no “downtown” high-rise business district. These drawbacks have not prevented the city becoming a favourite for Arab owners. Meanwhile, BMW, the city’s largest employer, has scores of overseas executive working in Munich.
As a result, some local estate agents now have alliances with international agents to increase their exposure. Munich is making its mark: all it has to do now is ensure its boom does not become the bubble that has caused so much grief elsewhere in Europe.
Graham Norwood was a guest of Knight Frank
● Transfer tax plus notary and estate agency fees add about 9 per cent to the buying price
● Munich has the lowest crime rate of any major German city – 7,153 crimes per 100,000 residents
● Last year 12 per cent fewer homes were sold than in 2011, but the amount spent rose 7 per cent
What you can buy for . . .
€500,000 A two-bedroom apartment near the city centre
€1m A large three-bedroom modern apartment in the city centre
€5m A rare, six-bedroom villa in Nymphenburg or Herzogpark
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