Immigration remains high – surprises on the housing market
2.2 million people – that’s how high net immigration has been in Germany over the past two years. In 2023, the country recorded the third-highest net migration rate since 1992, with a population gain of 660,000. Unsurprisingly, this growth has had a significant impact on the housing market, prompting cities and regions to adapt to shifts in demand. However, it is crucial to note that not all regions are equally affected. Precise differentiation is key to truly understanding what is happening.
Regions with high levels of inward migration find themselves dealing with surges in demand for housing, while other areas are grappling with increasing vacancy rates and declining property prices. Heightened demand is particularly evident in major cities and their satellites. And while it is important to keep an eye on international immigration figures, it also makes sense to factor in internal migration trends, especially as rising housing costs are leading more and more people to accept longer and longer commutes.
One major city records a net migration exodus
Data from the Bavarian capital, Munich, of all places, confirms an interesting internal migration trend. Of Germany’s Top 7 cities, Munich is the only one with a negative migration balance, with more people leaving the city than arriving. Notably, the decline in international migration is quite significant. In 2022, approximately 36,800 people relocated to Munich, whereas in 2023, this number was only around a quarter as high at 9,600. At the same time, negative internal migration has continued – almost 14,800 people moved from Munich to other German regions. It should, however, be noted that there have also been a number of register adjustments in the city of Munich, which have caused official population figures to fluctuate somewhat, creating a negative migration balance, despite the fact that Munich continues to grow.
Furthermore, there has been a decline in the immigration of young professionals, impacting a potential source of future growth. This can be attributed to the city’s housing shortage and exorbitant rents, which make it more difficult for people to access the housing market. This in turn fuels a growing willingness to commute, ultimately benefiting suburban and exurban districts. If this suburbanisation trend persists, it is likely to have repercussions on property prices in Munich and its environs.
Berlin retains its appeal
The trend in Berlin is quite different. The city is experiencing a significant influx of international immigrants. Without these 50,000 or so new arrivals, Berlin’s migration balance would also have been negative. This is because a substantial number of Berliners have also been migrating from the German capital to neighbouring districts and the nearby city of Potsdam, with as many as 15,500 doing so in 2023 alone. Both immigration and emigration will continue to have a profound impact on the capital’s housing market. Similar patterns can be observed in Hamburg, where strong international migration is also a prevailing trend.
Rural districts continue to face challenges
The outlook appears grim in many rural districts, especially in structurally weak regions. According to data from empirica regio, 85 rural and urban districts across Germany shrank last year. In many cases, the number of deaths exceeded the number of births, and migration failed to compensate. Consequently, many of these regions are facing challenging futures. Nevertheless, there are encouraging exceptions, such as the strategically located district of Wesel in North Rhine-Westphalia. Situated on the Lower Rhine and on the north-western periphery of the Ruhr region, in close proximity to two major cities, the district witnessed the highest internal migration rate of all districts, with a net influx of 3,805 people. This demonstrates that rural areas can also reap benefits from the “urban exodus”. In contrast, the Heidekreis district in the Lüneburg Heath region continues to grapple with a declining population. Despite a slight decrease in the rate of decline, the district is still shrinking, having lost another 1,299 residents last year.
What does the future hold in store?
The suburbanisation trend and the shift in housing demand towards peripheral areas are projected to significantly impact the property market in the long term. Suburbs and rural regions are poised to become increasingly important, while migration could slightly relieve the pressure on core cities. However, immigration from abroad will continue to be a key driver of growth in Germany’s Top 7 cities, ramping up the pressure on affordable housing. Regional differences are crucial: some rural areas are benefiting from internal migration, while others are struggling with outward-migration. Investors and urban planners should closely monitor these trends if they are to have any hope of making informed decisions.