Living In The City or Country Side

According to the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), for the first time in a long time since 2014 more people have moved away from large cities such as Berlin, Hamburg, Munich and Frankfurt than from sparsely populated areas to large cities. Various reasons are responsible for this trend. Anyone who wants to buy a property or is looking for an apartment is faced with the question of whether it makes more sense to live in the countryside or in the city. We have taken a closer look at both options and compared them.

In the large metropolises, however, one still has the feeling that the influx of people is unbroken, that the neighbourhoods are rather growing and that the city limits are shifting to the outside. So is there a migration from the city or the countryside? There is no clear answer to this question. Extensive analyses by the BBSR show clear regional differences here.

The current situation

In recent years, German cities, and in particular the seven most populous, have been densified in terms of urban development. Former commercial areas could be converted for the creation of living space in order to respond to the higher demand. Above all, the central residential locations are sought-after and accordingly expensive. All larger cities are affected by rising property prices and many quarters have been subjected to a process of gentrification.

The shortage of space and barely affordable rents or real estate have led to cities having to grow outwardly and to an increasing influx in peripheral areas. Another indicator of population movements is the vacancy rate. According to the Association of German Housing and Real Estate Companies (GdW), vacancy rates in the “new” federal states were significantly higher in 2016 (around 8.3 percent) than in the “old” federal states (around 1.9 percent).

The so-called swarm cities are benefiting from the population shift. Due to their proximity to the metropolises, more and more people are moving there because living space is cheaper and a comfortable infrastructure can still be used. Especially younger people between the ages of 20 and 34 are responsible for the increase. In certain cities, this population group has almost doubled in a period of only five years.

The real estate industry in transition

These changes represent a major challenge for the real estate and construction industries. Metropolitan regions throughout Germany are now affected by a housing shortage. East German cities such as Dresden, Leipzig and Jena are also attractive and popular.

Large and medium-sized cities are predominantly growing in breadth. The hitherto clear city boundaries are becoming increasingly blurred, for example due to a well-connected traffic structure. At the same time, structurally weak regions such as large parts of the eastern German federal states, certain municipalities in Rhineland-Palatinate or the region around Bielefeld and Paderborn are struggling with a growing vacancy rate.

The BBSR also regularly analyses transactions on the real estate market. This shows a significant decline in the trading volume of German rental housing portfolios. While the years 2010 to 2015 were among the years with the strongest turnover with over 300,000 transactions, the number fell to below 100,000 in 2016. According to BBSR results, many listed housing companies have been sold or taken over by larger groups in recent years as a result of the entry of international investors.

It is also interesting to note that real estate transactions focus on very specific regions in Germany (period from 1999 to 2016, sales of large housing portfolios from 800 residential units upwards):

  • North Rhine-Westphalia (28 percent)
  • Berlin (24 percent)
  • Saxony and Lower Saxony (8 percent each)
  • Schleswig-Holstein (7 percent)

However, small transactions (stocks of between 100 and 800 dwellings) still play a major role in the total volume of transactions.

Future concepts in demand

One of the main reasons for the collapse of housing market transactions is the lack of suitable portfolios. This reflects the tense situation, as demand for housing or real estate is still greater than supply. In particular, there are too few affordable premises.

A clear example of this is the rapid increase in the number of people in Germany who have no housing at all and have to live on the streets. Compared to 2014, this figure rose by over 30 percent in 2016, according to the Bundesarbeitsgemeinschaft Wohnungslosenhilfe (BAG W). Although immigration is one of the causes here, the stock of social housing has fallen by around 60 percent in the last two decades.

According to real estate market experts, construction is currently taking place in the wrong segment and in the wrong places. There are still too few small flats and apartments being built outside the luxury segment. The metropolises, but also the surrounding regions and swarm towns, must consider sensible concepts in order to make up for this shortcoming as quickly as possible. There are various challenges to overcome:

  • Searching for and providing suitable building sites
  • Creation of (financially) attractive living space
  • Creation of an attractive infrastructure and networking with the economic centres
  • Living in the countryside

Due to the rising housing prices and the lack of construction opportunities in the big cities, many people are left with only an escape to the surrounding countryside. Although some die-hard city dwellers find the sudden peace and seclusion difficult, rural life also has some advantages.

Comfort criterion nature

First of all, this includes the proximity to nature. Less pollution, larger open spaces, extensive green areas, in short: local recreation directly in front of the front door. The horizon alone is much lower here, as the buildings rarely exceed the limit of three storeys. The land areas are on average much larger, which also means that a more extensive private retreat is available.

Especially families with children often opt for a life in the countryside, because there is more space for their offspring to develop in the public space. Depending on their age, the little ones can also play unattended in the garden.

In times of increasing physical complaints such as allergies or chronic illnesses due to noise or environmental pollution and other influences of the living environment, retreating into the countryside is also a sensible alternative.

G8GYFX Singapore Financial District skyline at dusk.

Infrastructural disadvantages

On the other hand, there are disadvantages in the area of mobility and basic infrastructural provision. Depending on where you live, it may be necessary to commute to work in a city further away. This is associated with an additional expenditure of time. The provision of public transport is also not always well developed. Additional transfer points make the use of public transport even more unattractive. In addition, if there are no opportunities to shop in the immediate vicinity or go to the doctor, one is almost inevitably dependent on one’s own car.

A further point is the current situation with available Internet connections away from the big cities. In some rural regions, broadband expansion is still lagging behind, which for many people today is a locational disadvantage. Without a fast Internet, the green areas are very unattractive for some, and companies in particular are more likely to choose a location with better connections.

Here, too, the municipalities are called upon to push ahead with the sluggish expansion through their own initiatives if they do not want to miss out on digitalisation and remain attractive as places to live. The LTE mobile communications standard could be a possible alternative here. Expansion in this area has already progressed much further. Instead of laying expensive fiber optic cables in the ground, the fast Internet is available at low cost via the appropriate end devices.

The various providers now have tariffs in their portfolio that make surfing via the mobile connection affordable. Depending on personal needs, the right package can then be selected. However, data-intensive applications such as listening to music or streaming videos quickly consume several megabytes.

Real estate prices in the country

Not only the costs for the purchase of a real estate, also the rent prices decrease as a rule, the further away one is from the centre of a metropolis. According to the empirica research institute, apartments in West German cities are about 27 percent more expensive than in the surrounding districts. Depending on the location, there are even greater differences between large cities and the surrounding countryside.

If you want to build your own home, it is also easier to find what you are looking for in the countryside. In contrast to the densely populated metropolises, there are still areas available for new development and development.

What many do not take into account, however, is the calculation of mobility costs. This is because there is often no local job available. The job then has to be commuted, which is often associated with high regular expenses. Be it for petrol or public transport tickets. In some cases, living in the countryside can become more expensive than in the city.

Here, too, supply and demand determine market prices. While prices continue to fall in structurally weak regions, the costs of renting or owning a home are rising in regions close to the metropolises. The better the connections and the infrastructure, the more expensive the housing will be there.