The market for German student housing

Hausarbeit, 2017

17 Seiten, Note: 1,3


Table of Content

List of figures

List of Abbreviations

1 Introduction

2 Definitions
I Student housing
II Types of Student housing

3 Development of the Student housing market
I Recent years
II Current situation
III Future forecast

4 Conclusion

Reference list


List of figures

Figure 1: Student housing stock by rental value

Figure 2: Student housing by age and progress of study

Figure 3: Quantity of building permissions in the past

Figure 4: Rate of students doing their A levels in the period of time

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

In the period of low interest rates real estate has become apopular alternative to investing into stocks and other investments. The real estate investment market is well known for its classical core asset classes office, industrial, retail and residential. However,there are still many non-core asset classes which are known as niche sectors.

For the last few years one of these niche sectors,known as ‘student housing’,has increased in popularityin the German investment market. Student housing became one of the most popular non-core asset classes due to the increasing number of students and a bottleneck in the development pipeline, which resulted in a distinct need for student accommodation inrecentyears.[1]

Investors are especiallyattracted to the common viewof low risks due tohigh demand and the scarcity of suitable sites in cities and the good yield prospects. Furthermore, political interventionssuch as rent capping limit[2] and rent control[3],(will be defined and examined in ‘3.2 Current Situation’)which were introduced in recent years have shown no effect on the growth of rents. As a result, rents in student housing are permanently rising.However, it seems as if the student housing market will face some challenges in the future which could lead to a decrease in popularity.

This assignment examines theGerman market for studenthousing.It will define student housing itself as well as different types and will mainly focus on the development of the student housing market in the past, its current situation and the future forecast.

2 Definitions

2.1 Student housing

Student housing is a widespread term which has no universal definition. It can be described as residential space, which is exclusively used by students.[4] The reason for the existence of student housing as a niche sector is the need for accommodation for students who do not come from the surroundings of the place of study. It differs from residential space as it has other user requirements for the space. The largest difference is the matter of location. Student housing can be found in closer proximity to a university than in the most sought-after areas of the city. The size of this close proximity is dependent on the size of the university and its number of students.[5] Furthermore, a high fluctuation is typical for this non-core asset class because students usually study over a period of no longer than 4 years. On the one hand it allows lessors to raise their rents after every lease expires on the other hand it is combined with high costs for the lessor because he/she has to maintain the apartment after the leases expires.[6]

In comparison to classical lessees for residential space, students have only a very limited budget. Most students are only willing to pay a maximum of 300 Euros for rent which means students often search for small apartments or flat-sharing communities.(see figure 1)[7]

2.2 Types of student housing

Student housing can be separated intouniversity dormitories and the unregulated market. The following section will introduce the most important types.

I. Dormitories

Dormitories provide small apartments in close proximity to universities.

They are mainly separated into three different types:

1. Dormitories provided bystudent services are managed by student services,which work together with universities to fulfil the needs of the resident students.

2. Private dormitories are managed by service companies which are financed by private investors. They provide a higher living standard but demand higher rents. Investors prefer this type of student housing because it promises the highest yield prospects due to higher rents and less restrictions through universities or student services. (see figure 1)[8]

3. University-managed housing are dormitories which are managed by the university and are situated in the vicinity. They are designated for freshmen to give them help during their first part of their studies.[9]

II. Unregulated market

Every type of student housing, which is not listed in the category of dormitories,is part of the unregulated market. Flat shares, student apartments in non-student housing buildings and student apartments in private properties are only a few examples of the large number of types in the unregulated market.Aggravated competition with residential spaces is the driving force and regulates the rents due to supply and demand. [10]

Only 10% of all students studying in Germany prefer living in a dormitory.[11] Accommodationin the unregulated market is mostly preferred by students at German universities and makes up the largestpart with more than 66% of all students.[12] These numbers depend on many determinants: especially the age of the students is a decisive factor. Studies have shown that younger students tend to prefer dormitories over individual apartments while older students appreciate their own apartment.(see figure 2)[13]

Additionally, the degree course is a decisive factor. Only 14% of engineering students but 25% of medicine students live in their own apartment.[14] This might be a result of the frequency of the different course degrees as more universities offer course degrees in engineering than in medicine.[15]

3 Development of the student housing market

3.1 Recent years

Student housing has not been a highly relevanttopic in the past 50 years as it is today. The real estate literature reported very occasionally about it. Nevertheless, student housing is not only a phenomenon of today’s world but still existed in the past when there was less interest.The following section will examine the interval since the separation of Germany until today.

The GDR was often associated with lower living standards than West Germany. However, the GDR managed to allocate enough living space for nearly every student.[16] This was mainly a result of very old and fragile buildings with low indoor environment quality and large prefab buildings which were built in the late sixties and early seventies in the larger university cities to provide enough living space through many small micro-apartments[17]. Additionally, the rents estimated between 0.8 and 1.25 DM per sqm so that even students faced no problems in paying their rents.[18] While in the GRD students lived in low quality student accommodations, the residential market in the FRG was unable to cope with the huge demand when the baby-boom generation of the mid-sixties born entered the universities.[19] Moreover, West Germany did not react to this deficit in supply and refused to build more student housing although the rate of the students provided with living space amounted to nearly 10%.[20]

The reunification blended the former GDR and the FRG to Germany. Not only the life of the citizens of both countries changed dramatically, moreover the whole economy, especially the real estate industry within the residential market was immensely affected by the reunification.After reunification the supply of student housing in East Germany has suffered a retrogression.[21] Many of the old buildings were demolished because the sinking number of population generated high vacancy rates.[22] Furthermore, western investors saw good yield prospects in these buildings. They bought, maintained and leased them for higher rents than students were able to afford.[23] This led to a falling rate of student accommodation per student and an assimilation to the rate of former West Germany to about 13%.[24] After that the market for student housing appeared to be out of media for a long time. Until the late 2000s the rate of satisfied demand has decreased from 14% to 12% of satisfied demand.[25]

Finally, the two markets for student housing in Germany developed very differently in the past but after the reunification, the market in East Germany with its former high rates of student accommodation assimilated to the market in West Germany and its low rates of student accommodation.[26]

3.2 Current situation

Recently, a new phenomenon occurred on the student housing market. The number of students, which oscillated for an interval from 1991 until 2007 in a range of 100,000 students, more or less exploded in the following years.[27] Increasingly more students entered universities and by the winter term of 2016/2017 45% more students were enrolled than in 2006/2007.[28] This phenomenon can be explained due to the elimination of conscription in Germany in 2011 and changes in the educational system which led to the situation that two age groups did their A levels at the same time.[29]

Additionally, the conditions on the labor market have changed and many firms are facing a shortage of skilled workers.[30] Because of this change in economics the number of students with A levels who prefer studying over doing an apprenticeship nearly doubled from 33% in 2000 to 59% in 2015.[31] Furthermore, many sources claim that international students which come from abroad and study at German universities because of the lower costs and better education may be adecisive factor for the high demand for student housing.[32] However, studies show that the number of international students increased only very slightlysince 2005.[33]

Simultaneously to the rising demand due to the above-mentioned conditions the number of student accommodations slightly decreased in the interval from 1991 until 2016 from 246,000 to 240,000 units.[34] Especially the declining quantity of building permissions in the residential market between 1994 and 2010 was a major reason for the regression of the supply in the unregulated student housing market (see figure 3).[35] As a consequence the vacancy rate,which was according 4.1% in 2006 reached a record low of 3% in 2015.[36] Moreover, the vacancy rate of larger German cities decreased to much lower levels while it increased in rural areas. Frankfurt reached a vacancy rate of 0.5% and Munich registered a record low of 0.2%.[37] Due to low vacancy rates and therefore a low investments risk, the residential sector within student housing has become more attractive to investors than other asset classes.

Furthermore, the German government has attempted to act against the trend of rising rents with reforms. Firstly, the government of eleven federal states announced a rentcapping limit in 2013, which allows the lessor toraise the rent in a current lease contract to a maximum of 20% in a period of three years.[38] However, the reform did not work out because many lessors let the lease contracts expire and created a new contract with a higher rent than the rent capping limit would have allowed.Therefore the government introduced the rent control in 2015. It regulates that rents of a new lease contract are only allowed to be 10% higher than the local reference rent.[39] Currently increasing rents, especially in larger cities show that even the rent control failed. Moreover, critics consider that lessors already raised the rents a few months before the introduction of rent control. [40] Following this, the rent control even supported the increase in rents.Both reforms appear to have failed immediately after their introduction. As a result, rents were not stopped and even the rents for student housing, which is a part of the residential market,have increased in recent years.

Finally, the increasing demand and the decreasing supply result in an escalation of the rents for residential space in recent years. In the largest German cities rents increased from an average rent of 8.50€ per sqm in 1997 to 13.50€ per sqm in 2017.[41] The data would seem to suggest a significant chance for investments and new construction projects, however, the situation is much more complicated. Yield prospects are sinking because sales prices are rising faster than rents.[42] Due to this, critics claim that this effect could lead to a phenomenon known as real estate bubble which may pose a risk for the real estate industry.[43]

3.3 Future forecast

Student housing is one of the most attractive non-core asset classes in thereal estate industryforcurrent investments. Even in the future, student housing may play a key role in the real estate investment market:

25% of all students will have a higher budget due to a new reform announced by the German government to increase maximum BAFöG from 670€ to 735€ per month.[44] More students will be able to afford student housing than before the reform, therefore demand for student housing may rise.

Moreover, the rate of German students currently studying for their A levels has been rising for several years and is expected to rise further in the future (see figure 4).[45] Following this, more students will be qualified to enter a university and enhance the demand for student housing.In addition to the rising rate of students doing their A levels, the rate of these students preferring studying over an apprenticeship isexpected to increase too as firms are attaching greater importance to highly educated workers[46] Even if this trend should decline, the high demand due to the scarcity of residential space in larger university cities will ensure a high occupancy of student apartments.

European universities are changingincreasingly to international courses. Especially, German universities are expected to be preferred by international students due to low tuition costs and high education standards.[47] In East-Asia and Africa studying abroad is gaining greater popularity which will attract more international students to German universities.[48] This may further cause an increase in demand for student housing.

Finally, student housing might be a very secured choicewith high yield prospectsfor current investments due to the high demand and low supply in the future.


[1] See Nau, P.; Greve, C. (2016): Wohnraum für Studierende, p. 23.

[2] See BGB (2017) §558 par. 3.

[3] See BGB (2017) §556d.

[4] See Catella (2017).

[5] See Glatter, J.; Bartsch, S.; Meinert, M.; Wolff, M. (2012).

[6] See Glatter, J., Hackenberg, K., Wolff, M. (2014), p. 393.

[7] See Savills (2015).

[8] See Savills (2015).

[9] See Catella Property Group (2017).

[10] See Catella Property Group (2017).

[11] See Middendorf, E. et al (2013), p. 406.

[12] See Middendorf, E. et al (2013), p. 406.

[13] See Middendorf, E. et al (2013), p. 425.

[14] See Middendorf, E. et al (2013), p.418.

[15] See Hochschulrektorenkonferenz (2015), p.12.

[16] See Nau, P.; Greve, C. (2016): p. 21.

[17] See Syring, G. (2009).

[18] See Syring, G. (2009).

[19] See Glatter, J., Hackenberg, K., Wolff, M. (2014), p.386.

[20] See Nau, P.; Greve, C. (2016): p. 21.

[21] See Nau, P.; Greve, C. (2016): p. 22.

[22] See Syring, G. (2009).

[23] See Bullinger, D. (2002).

[24] See Nau, P.; Greve, C. (2016) p. 22.

[25] See Nau, P.; Greve, C. (2016) p. 23.

[26] See Nau, P.; Greve, C. (2016): p. 23.

[27] See Statistisches Bundesamt (2017).

[28] See Statistisches Bundesamt (2017).

[29] SeeGlatter, J., Hackenberg, K., Wolff, M. (2014), p.386.

[30] See Heming, J. (2017), pp. 139-140.

[31] See Statistisches Bundesamt (2017).

[32] See Glatter, J., Hackenberg, K., Wolff, M. (2014), p.386.

[33] See Savills (2015), p.2.

[34] See Nau, P.; Greve, C. (2016): p. 23.

[35] See Statistisches Bundesamt (2016).

[36] See CBRE-empirica AG (2016), p.3.

[37] See CBRE-empirica AG (2016), p.1.

[38] See BGB (2017), §558 par. 3.

[39] See BGB (2017), §556d.

[40] See Kholodilin, K. A., Mense, A., Michelsen, C. (2016), p. 498.

[41] See DG HYP (2016), p.42.

[42] See Hagen, J., Hackenberger, J. (2014), p. 3.

[43] See Hagen, J., Hackenberger, J. (2014), p. 3.

[44] See Savills (2015).

[45] See IREF (2015).

[46] See Heming, J. (2017), pp. 139-140.

[47] See Weymann, A., Martens, K. (2005), p.13.

[48] See Weymann, A., Martens, K. (2005), p.14

Ende der Leseprobe aus 17 Seiten


The market for German student housing
Hochschule Aschaffenburg
ISBN (eBook)
ISBN (Buch)
690 KB
german, student housing, studenten, immobilien, studentenwohnung, accommodation, market, real estate, residential, housing market, wohnimmobilien, wohnheime, dormitories, real estate bubble, urbanisierung, universität, a lage, b lage, student accomodation
Arbeit zitieren
Marvin Greim (Autor:in), 2017, The market for German student housing, München, GRIN Verlag,


  • Noch keine Kommentare.
Im eBook lesen
Titel: The market for German student housing

Ihre Arbeit hochladen

Ihre Hausarbeit / Abschlussarbeit:

- Publikation als eBook und Buch
- Hohes Honorar auf die Verkäufe
- Für Sie komplett kostenlos – mit ISBN
- Es dauert nur 5 Minuten
- Jede Arbeit findet Leser

Kostenlos Autor werden