Analysis of the Hamburg Housing Market: Land and Property Economics

This report delves into the economic aspects of the Hamburg property market, Germany's second-largest city. It examines the city's robust growth, focusing on how factors like wage levels, house rents, and land acquisition policies influence housing prices. The analysis covers price trends, average local wages, and the long-run economic trends affecting the housing market. It also investigates access to rented accommodations, property cycles, and urban land prices. The study uses available data to evaluate the housing market's fluctuations, incorporating the impacts of structural development and supply shortages. The conclusion summarizes the key economic factors affecting market instability and the initiatives taken to revive growth, while also highlighting challenges like regional price disparities and rising rents. The report is structured to provide a comprehensive overview of the Hamburg housing market's economic dynamics.

Runninghead: LAND AND PROPERTY ECONOMICS
Land and Property Economics
Name of the Student
Name of the University
Author Note

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Executive Summary
The objective of the paper is to introspect the role of purchasing power in determining the
economic condition of the housing market in Hamburg. The city is one of the flourishing cities in
Germany. The paper is structured using available reliable data sources. Several economic
parameters, like, wage, house rent, land acquisition policy and asset development projects are
considered to evaluate the recent fluctuation in the housing price. The paper further incorporates
the impacts of structural development to examine the supply shortage of the housing market.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
1. Price Trend of the housing market........................................................................................3
2. Average Local Wages..............................................................................................................6
3. Long run trend of the Hamburg economy.............................................................................6
4. Access to rented accommodation...........................................................................................7
5. Property Cycles in Hamburg..................................................................................................7
6. Urban Land Prices..................................................................................................................8
Conclusion.......................................................................................................................................8
Reference List................................................................................................................................10
Appendix........................................................................................................................................11

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Introduction
The study has been developed with the aim of discussing the economic aspects of
property market of Hamburg. It is the second largest city in Germany. Hamburg is known as the
Gateway of Germany to the world. The city has been experiencing a robust growth in the small
and medium size enterprises since 2013. This is expected to allow a large scale of inhabitants to
have a local residence in Hamburg. The paper has attained to analyze the price trend of the
Hamburg housing market over the last couple of years. Data reveals that the median housing
price has been reported to get increased by 7.5% (approximately) in 2019 as compared to 2018.
It has been observed that the consumer demand is the key determinant to formulate the housing
price structure (Granath Hansson, 2019). The wage structure of the local community is deeply
associated with the market demand of the housing sector.
Discussion
The paper observes that demand gets improved in response to the increase in the average
wage level. Local wage determines the affordability of the consumers. The paper therefore has
attained to derive the long-run trend of the regional economy of Germany. As per the market
research, the access to the public or private property for rent accommodation is another
influencing factor for the property sale. In this regard, the paper incorporates the background and
urban land price to examine the market structure of the housing sector.
1. Price Trend of the housing market
Hamburg has been observing flourishing housing demand driven by robust population
growth throughout the last decade. As per the data, the population has been grown by 10,000 in
the last year. Considering the fact, an advanced construction plan has been proposed to meet the

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overwhelming demand for housing. For instance, approximately seven thousand apartments has
been planned to support the multistory residential buildings policy.
Figure 1: Housing demand and supply in Hamburg
Source: (Globalpropertyguide.com, 2020)
The figure 1 describes the performance of the housing market of Hamburg from 1997 to
2025. It has been observed that market has taken the upward trend after the initial fall during
2001-2011. This diminishing housing demand is considered as the result of dwindling condition
of the financial market and decreasing wage level of the local people. However, the housing
market has got revived following the growing practice of pre-emptive procurement rights. This
allows the customers to purchase apartment at affordable price rate (Wijburg & Aalbe, 2017).
Apart from that, the principle authority is also concerned with the living space of the local
apartments. Such type of housing market instruments are expected to augment the market
demand for the housing sector. Henceforth, residential demand is assumed to play the key

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Figure 2(a): % change in Housing price
2008-2018
Figure 2(b): Residential development project
2019- 2021
driving force to meet the target for house completions. As per a renowned article, the residential
supply in Hamburg is already short in residential units of forty thousand as compared to the
demand. This is expected to lead to the hike of residential price by 10% year over year. The
narrator confirms that the increasing demand is not driven by the Brexit decision
(Thepropertyguygermany.com, 2020). The basin restricted construction activities and shortage in
land supply has doubled the residential demand in Hamburg. Considering the fact, the general
housing demand and supply in the concerned city is expected to be more sensitive due to the
inter-state changes in the housing policy.
Source: (Dbresearch.com, 2020)
Referring to figure 2, the paper states that the market price of both new and existing
apartments has faced a significant improvement by 90% over the last couple of years.
Meanwhile, the private property, like, single family houses has not responded well to the
reconstructive residential policy (Buchholz, 2016). The sector has experienced a growth below

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50% year –over-year in Hamburg. In terms of the market experts, several numbers of residential
projects by the government are expected to boost the cumulative demand, which in turn, will
augment the future price of the houses. For example, TarpenbekarUfer and Pergolenviertel are
those two residential projects which will develop 2350 apartments during 2020 and 2021.
Altogether, it will bring impressive outcome on the supply of the commercial and industrial land.
2. Average Local Wages
According to the study, the labor market in Hamburg has been continuously lagging
behind in comparison with other metropolitan cities in Germany. The employment growth is not
supportive in terms of enhancing the housing demand of the local market. Approximately 20%
growth has been experienced by the Hamburg employment sector in the recent years. However,
the employment growth is remarkably lower than advanced cities. Hospitality sector and social
sector have significant contributions to the workforce of Hamburg (Scheller & Thörn, 2018). As
the concerned city is not good from the academic aspect and manufacturing sector, the housing
demand is relatively less. In terms of the academic environment, the city has secured the 14th
position which triggers a great challenge for the aspiring students. The number of undergraduate
students has reported to get increased by 20% which can be related to the negligible
improvement of the employment level.
3. Long run trend of the Hamburg economy
The economy of Hamburg has been striving to minimize the gap between employment
and unemployment offering significant job opportunities to the local people. The cumulative real
wage level has soared up by 10% following 2009. In the meantime, the unemployment has been
declining by 3% which is further expected to fall by 5% in future. Moreover, the lackluster
movement of the international economy coupled with marginal deterioration in the core inflation

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is expected to generate sluggish economic growth for Hamburg (Möbert, Schneider & AG,
2018). Despite, the authority intends to boost the multi-trillion residential project to intensify the
purchase program. The continuous focus on the repayment process regarding the maturing
securities and net purchase of the asset could bring impressive growth of the housing sector in
Hamburg.
4. Access to rented accommodation
Hamburg is counted as one of the 53 cities located at the northern province of Germany.
The significant disparity between the south and north area with respect to the on-family house
causes a serious concern for the aspiring house buyers. In general, the consumers always attain to
spend a less amount to purchase a property. The data reveals that price of the single-house in
north is costlier than north. This denotes the remarkable difference across the economy of
Germany with respect to the regional diversity (Auspurg, Hinz & Schmid, 2017). According to
the study, the cumulative rent of single housing has raised by two times within one year. The
strong rental growth of 5.5% can be referred to the overwhelming housing demand of the
customers. Low marginal rental price is considered as a result of persisting pressure on the
lowering the average rental charge. It has been observed that the growing rental cost burden has
compelled the market regulators to set the rental charge comparatively at lower price. This
modification in the housing rental policy results in the most effective outcome for the all those
apartments having the area of less than 45 square kilometer.
5. Property Cycles in Hamburg
As per data, property cycle in the estate market in Hamburg is comparatively elastic with
respect to the housing price. This implies that fluctuation in the average housing price results in
the significant change in the consumer demand. A minor change in the price structure may

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reduce the local demand. The recent reconstruction activities across Hamburg are not sufficient
to support the growing demand of the local communities. This has led to a robust growth in the
average price of the apartment price. In this regard, Hamburg has gone through a slow price
momentum due to poor performance of the labor market. Supply shortage and sluggish wage
growth of the local have been failed to augment the demand of the housing market. Considering
the fact, the concerned property cycle should remain unchanged in 2020 in respect of 2019. If
demand for the property cycle would have been improved to a significant extend, it can be
asserted that the cycle could have achieved an advanced position countering the detrimental
impact of the global financial crisis 2009 (Chen & Funke, 2014). The housing sector is reported
to suffer from a loss of one million units due to insufficient structural development of Hamburg.
6. Urban Land Prices
Urban land price is the sensitive issue for the housing market. According to the
researchers, urban land price has been augmented by 20% in 2019 (Jll.de, 2020). The deficiency
in the land supply and complication in the land accession system are referred to the serious
concerns for the local land developers. it has been observed that primitive action against the land
acquisition process makes the estate developers unhappy (Thanos, Dubé & Legros, 2016). Most
of the land development projects have been invalid owing to prolonged delay in the asset
procurement system. Moreover, risk of land valuation is unlikely to uptrend the land price.
Conclusion
The paper concludes that the economic factors, like, employment, wage, house rents and
land are responsible for the unstable situation of the housing market. Following the global
financial shock in 2009, the city has been taking several initiatives to revive the growth of the
local housing market. The employment growth has achieved a remarkable growth due to the

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combined effect of migration policy and structural development. The affordable price structure is
the alluring strength of the estate sector of Hamburg. Nonetheless, the growth of the housing
market has failed to deliver the desired outcome. The study has found that, housing price
disparity at the regional level and skyrocketing movement of the house rents are the vital hurdles
to achieve the goal of the local property market.

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Reference List
Auspurg, K., Hinz, T., & Schmid, L. (2017). Contexts and conditions of ethnic discrimination:
Evidence from a field experiment in a German housing market. Journal of Housing
Economics, 35, 26-36.
Buchholz, T. (2016). Struggling for recognition and affordable housing in Amsterdam and
Hamburg: resignation, resistance, relocation. Groningen: University of Groningen.
Chen, X., & Funke, M. (2014). Renewed Momentum in the German Housing Market: Real-Time
Monitoring of Boom vs. Bubble. Working Paper, Hamburg University.
Dbresearch.com.(2020).https://www.dbresearch.com/PROD/RPS_EN-PROD/
PROD0000000000488315/German_property_and_metropolis_market_outlook_2019.pdf
Globalpropertyguide.com.(2020). https://www.globalpropertyguide.com/Europe/Germany/Price-
History
Granath Hansson, A. (2019). City strategies for affordable housing: the approaches of Berlin,
Hamburg, Stockholm, and Gothenburg. International Journal of Housing Policy, 19(1),
95-119.
Jll.de.(2020).https://www.jll.de/content/dam/jll-com/documents/pdf/research/emea/germany/
en/Residential-City-Profile-Hamburg-JLL-Germany.pdf
Möbert, J., Schneider, S., & AG, D. B. (2018). The German housing market in 2018. Deutsche
Bank Research.

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Scheller, D., & Thörn, H. (2018). Governing ‘Sustainable Urban Development’Through Self‐
Build Groups and Co‐Housing: The Cases of Hamburg and Gothenburg. International
Journal of Urban and Regional Research, 42(5), 914-933.
Thanos, S., Dubé, J., & Legros, D. (2016). Putting time into space: the temporal coherence of
spatial applications in the housing market. Regional Science and Urban Economics, 58,
78-88.
Thepropertyguygermany.com. (2020). The German housing market in 2018 -2019 - The Property
Guy Germany. https://thepropertyguygermany.com/the-german-housing-market-in-2018/
Wijburg, G., & Aalbers, M. B. (2017). The alternative financialization of the German housing
market. Housing Studies, 32(7), 968-989.

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Appendix
Source:https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000488315/
German_property_and_metropolis_market_outlook_2019.pdf
Source:https://www.jll.de/content/dam/jll-com/documents/pdf/research/emea/germany/en/
Residential-City-Profile-Hamburg-JLL-Germany.pdf