North Rhine-Westphalia: German Investment Center

North Rhine-Westphalia is now recognized as one of the most developed federal states in Germany - it is an investment-attractive region of the country, which has become the world's largest exhibition site and the industrial center of Germany. Dozens of headquarters of both the world's leading corporations and hundreds of Russian companies are located here. In 2016, this region became the national leader in terms of foreign direct investment in the amount of 180 billion euros.

In 2018, the highest GDP in the country was recorded here in the amount of 705.1 billion euros. In addition, Dusseldorf ranks sixth in the ranking of cities in the world by the international human resources consulting company Mercer, which has become an additional factor for the growth of attention both to the city itself and the region as a whole.

 

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Features of the region

It is on the territory of North Rhine-Westphalia that the highest population density of the country's cities is recorded - the number of inhabitants reaches 18 million people (out of 80 million living in Germany). Besides the fact that this land is an economically developed area, it also borders the Benelux countries, which also affects the additional influx of people. And cities in the region such as Cologne, Dusseldorf, Dortmund, Essen, Duisburg and others are intensively developing today, including in the real estate sector. Housing prices continue to grow, among other things, because there is an active influx of population to this region, due to which there is consistently high demand.

Dusseldorf and Cologne are the strongest cities in North Rhine-Westphalia in the investment sense due to their strong economic development and growing indicators. In all national real estate market rankings, they closely follow Munich, Berlin and Hamburg. In the last five years alone, housing prices in them have skyrocketed by 44% - a reaction to increased consumer interest. Another factor that significantly affects prices is the large gap between the number of apartments under construction and the volume of demand.

The lack of housing stock in this land is due to the fact that the real estate and construction markets in North Rhine-Westphalia in large cities interact poorly. There are not enough land plots, but obtaining a construction permit can take several years. It is planned that municipalities will approve more construction permits and process requests in a shorter time to avoid rising rental rates. Dusseldorf, Aachen and Bonn are exemplary in this regard, as in 2018 a large number of new houses were built in these cities. However, population growth in Dusseldorf and Cologne is still significantly higher than growth in the housing sector.

Where to buy?

Investors who prefer to invest in prestigious housing, it is best to invest in square meters in Cologne and Dusseldorf; it is here that investors from the UAE and Russia are willing to buy.Our customers also often choose the "golden mean" between prestige and profitability - these are cities such as Essen, Wuppertal, Neuss, Krefeld. Investments in Bonn, Munster, Dortmund or Bilifeld can become a more budget-friendly alternative, which promises an annual income of 3.6-3.9% with a risk factor of 8 points.

Foreign investors from the CIS, as well as Asian countries and the United States are actively investing in apartments in new buildings and secondary apartments in attractive areas of Dusseldorf and Cologne. Such investments promise lower profitability from 2.3% to 4% due to rising prices, but buyers still continue to invest in real estate despite the annual price increase. In any case, this is the most reliable and prestigious type of investment, which in ten years due to the rise in price can pay off 1.5-2 times.

Of the little-known cities of North Rhine-Westphalia to the Russian public, which also have a favorable investment environment, one can also note Krefeld and Neuss; these are relatively small cities, but they are located near Dusseldorf, which is why they are also interesting for buying real estate. Demand certainly depends on the purpose of the purchase: those who want to have more income will be primarily interested in Duisburg. This city has the highest profitability and investors from Israel very often buy real estate here.

Contrast of the real estate market

The real estate market in North Rhine-Westphalia is characterized by the fact that the four fastest growing cities - Cologne, Dusseldorf, Bonn and Munster - have high housing prices and rents, while Duisburg, Bielefeld, Gelsenkirchen and Bochum show a significant lag behind them. At the same time, in the twelve largest cities of the region, prices for apartments and houses are growing much faster than rents: it grew by an average of 3.7% in one year, while the cost of buying a home increased by 8.9%.

As you know, Germany has never been a country of apartment owners: most people here live in rented housing despite low mortgage rates, but, of course, there is a stratum of investors and wealthy people among the population who buy apartments for themselves or professionally invest. Therefore, when buying in North Rhine-Westphalia, it is so important to pay attention to the advantageous and liquid location of the object, even with average parameters. When renting it out, you can get a good return.

Prices

Currently, a square meter of living space in North Rhine-Westphalia costs an average of 2,000 euros, but with huge differences between cities. Dusseldorf remains the leader with an average price of 3773 euros per square meter, an increase of 35.2% over the past four years. In Cologne, a square meter will cost an average of 3,648 euros (a 40% increase in cost), in Munster - 3,562 euros (+ 31.6%), in Bonn - 3,047 euros (+31.7%).

So far, there is still the possibility of entering the real estate market of North Rhine-Westphalia with a small amount - apartments in cities around Dusseldorf with an area of 30-40 square meters now cost 35,000-50,000 euros. At the same time, owners can expect 6-7% per annum. In Dusseldorf itself, an apartment of a similar size will cost at least 100,000 euros. These are the initial prices of the secondary housing stock or we are talking about apartments already rented out (as a rule, apartments with tenants in Germany are cheaper than apartments ready for living).

Respectable housing is widespread in the region - both apartments and houses can be very expensive, varying depending on the square footage, the specific location and the level of infrastructure.The average cost per square meter in Dusseldorf and Cologne now varies between 3500-7000 euros per square meter. Thus, a one-bedroom apartment in Dusseldorf with a size of 60 sq.m will cost about 230,000 euros in the secondary housing market. In Cologne, an almost similar apartment with a size of 58 sq.m can be purchased for 215,000 euros, but if the option of buying in a new building is considered, then it will be 370,000 euros. Buying a townhouse in the suburbs of Dusseldorf will cost 790,000 euros, a house or villa with an area of more than 230 square meters - 1.5 million euros. In the vicinity of Cologne, houses cost from 550,000 Euros to 1 million euros. 

As for other budget options, in addition to the surroundings of Dusseldorf, they are also available in the city of Wuppertal, where apartments cost from 25,000 to 60,000 euros. Such a low cost certainly attracts buyers from Russia. But here you need to understand the high risks that are associated with the purchase, if we are talking about purchasing housing for rent: if the tenant moves out of the apartment, then there is a high risk that you will have to look for a long time for a new person who wants to move in, and the apartment will be empty.

Real estate as a business

There are also very good commercial real estate offers on the North Rhine-Westphalia market - for example, an apartment building for 4-5 apartments can be bought for 230-250 000 euros. In this case, of course, we are also talking not about Dusseldorf, but about smaller cities, but, nevertheless, this is a good investment tool that allows you to enter the German commercial real estate market with a small amount and receive a good income.

Due to the fact that in the real estate market of North Rhine-Westphalia, when there is a shortage of housing, some real estate companies develop a number of construction projects in which they invite investors to participate with a minimum investment amount of 100,000 euros. The construction is carried out by German companies with extensive experience, under the supervision of the architect and the construction department, in compliance with all deadlines and technologies, thanks to this, the profitability can range from 7% to 17% per annum, depending on the amount and conditions of participation.

Thank you for your help in preparingmaterial:< / em>< / p>

Yevgeny Kulikov, expert of the company < / em> < em > Inteco Real Estate< / em>< / a>< / p>

< em>Natalia Zavalishina, director of the company & nbsp;< / em>Distant & nbsp;Property & nbsp;< / em>< / a>< / p>

Ekaterina Demidova, expert of the company & nbsp;< / em> DM Group< / em>< / a>< / p>