Location Ranking (A, B, C & D)
- The German real estate market is so diverse that it helps to rank cities among their attractiveness as a location
- While A locations are the top 7 German cities, locations have a potential higher return on rent from B to C to D
- The location ranking can help you to find the best location(s) in Germany to buy properties in
Introduction: A B C D Location Ranking Explained
If you would like to invest in real estate in Germany, one of the very first questions you are asking yourself is: In which location should I buy a property? The location ranking of German cities (A, B, C, or D) will help you to find an answer:
- A locations are the top 7 cities that are the most popular and the most expensive to buy real estate in
- B locations are major cities with at least 250.000 inhabitants and many attractive features (e.g. national significance)
- C locations have at least 100.000 inhabitants and important relevance to their surrounding region
- D locations are small cities with a central function for their immediate surroundings (e.g. large employer)
As seen in the 2 examples from a popular German real estate website, it makes a tremendous difference if you are buying in an A (in Munich) or in a D location (Chemnitz). While you can buy a 36 sqm flat for 729.000€ (=20.000€/sqm) in Munich, you can buy for almost the same price an entire house with residential and commercial space in Chemnitz for less than 500€/sqm.
A Locations In Germany
The German capital Berlin with 3,7 million inhabitants, Hamburg with 1,8 million, Munich with 1,5 million, and Cologne with 1,1 million inhabitants are simply for their size an A location.
Frankfurt is the financial center of Europe after London lost that status due to Brexit. Stuttgart is the 6th largest city in Germany and home to many internationally known companies like Mercedes Benz and Porsche.
And last but certainly not least: Düsseldorf. Home of the “high society” in Germany with close proximity to A location Cologne. Together they are in the Ruhrgebiet, the economic powerhouse of Germany.
Examples of A locations in Germany:
- Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart
B Locations In Germany
While the arguments for A locations are pretty obvious, it gets interesting with the B locations in Germany. B cities are second-tier locations that have a lot to offer in terms of attractiveness for real estate:
Dresden is also home to the tech industry association “Silicon Saxony“ with more than 400 (international) companies and more than 40.000 employees.
A city that experienced incredible growth over the last decades and is now one of the fastest-growing cities in Europe is Leipzig. Therefore, Leipzig has been growing from a C location into a B location.
Proximity to an A location can also be an argument for a B location. Mönchengladbach alone might be considered more like a C location but becomes more like a B location with its close proximity to A location Düsseldorf. That is why we issued our very first real estate security token in Mönchengladbach.
Examples of B locations in Germany:
- Augsburg, Bochum, Bremen, Dresden, Essen, Hannover, Leipzig, Mannheim, Mönchengladbach, Nuremberg, etc
C Locations In Germany
The further we go down the location ranking, the longer the list of German cities. There are a lot more C and D locations than A locations (just the top 7 German cities).
While B locations have a population of at least 250.000 people, C locations should have at least 100.000 inhabitants. This size makes C locations important to their region, even though they might not be that important to Germany as a whole anymore.
Aachen has almost a population of 250.000 and a large university and is therefore considered a very good C location. If the city continues to grow, it might become a B location eventually (like Augsburg was a C location back in the day).
Halle has almost 250.000 inhabitants as well and is in close proximity to B location Leipzig (like Potsdam is close to A location Berlin). That feature makes these cities very good C locations.
While a B location needs to be important in and of itself (e.g. population, university, companies, economic power, etc), a C location is more dependent on the surrounding area to be important.
Examples of C locations in Germany:
- Aachen, Erfurt, Erlangen, Halle, Heidelberg, Kiel, Mainz, Potsdam, Saarbrücken, Ulm, Wiesbaden, etc
D Locations In Germany
The list of German cities is the longest when it comes to D locations. These D locations offer potentially the highest investment return while proposing the highest risk at the same time.
Small and medium-sized German cities that mainly depend on one large employer (SAP for Walldorf, Adidas for Herzogenaurach, Audi for Ingolstadt, etc) are D locations as they don’t offer much more than this one company.
The almost 1.500 sqm house on the +2.000 sqm plot for less than 500€/sqm mentioned in the introduction is also in a D location (Chemnitz). That explains why this property is so “cheap.” If the same house would be in an A or B location, it would be a lot more expensive.
Examples of D locations in Germany:
- Bielefeld, Chemnitz, Herzogenaurach, Koblenz, Regensburg, Trier, Tübingen, Schwerin, Walldorf, Wolfsburg, etc
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Should You Invest In An A, B, C, or D Location?
After learning all the details of the German location ranking that ranks cities in Germany according to their attractiveness for real estate investments, there is just one more question left to answer: Which location or locations should you buy real estate in? 🤔
The answer depends on a couple of different factors:
- Your budget: Not surprisingly, properties in A locations are much more expensive than similar properties in C or D locations. Ask yourself how much you would like to invest in a property or how much you can afford to invest.
- Your strategy: As properties in A and B locations are more secure, their return is potentially lower than properties in C and D locations. But be careful: A high return on rent on a D location can become a 0% return on rent if you don’t find a tenant in the middle of nowhere.
- External factors: You might not be able to control (e.g. inflation or mortgage rates).
As ever so often in the world of investing and personal finance, diversifying is key to true investment success. Strive to build a real estate portfolio of many different property types in many different A, B, C, and maybe even D locations. Our blockchain-based real estate security tokens help you do exactly that. Register as an investor on GermanReal.Estate and experience the easiest way to invest in real estate in Germany.