Secondary Cities in Germany (B-Städte): Why Smart Investors Are Shifting Focus
For years, Germany’s real estate investment landscape has been dominated by A-cities such as Berlin, Munich, Frankfurt, Hamburg, and Stuttgart.
But by 2025–2026, many professional investors are rebalancing their portfolios — moving towards secondary cities (B-Städte), where yields are higher, regulations lighter, and market entry costs significantly lower.
What Are B-Cities?
B-Cities (secondary cities) are mid-sized urban centers with strong economic fundamentals, stable population growth, universities, and infrastructure — but without the overheated property prices typical for A-cities.
Examples include:
Leipzig, Dresden, Nuremberg, Hanover, Karlsruhe, Bremen, Augsburg, Magdeburg, Münster, and Mannheim.
These cities combine affordability with solid rental demand, making them ideal for long-term buy-to-let and value-add strategies.
Why Investors Are Turning to Secondary Markets
1. Better Yields
- In top A-cities, net rental yields (Nettorendite) often fall below 2.5 %, while in B-cities it’s common to achieve 3.5–5 %.
- Entry prices are 30–50 % lower, yet rental levels remain solid.
Example:
- Berlin: €6,500/m² purchase price, €15/m² rent → ~2.7 % gross yield
- Leipzig: €3,000/m², €10/m² rent → ~4 % gross yield
2. Lower Regulatory Pressure
- Mietpreisbremse and rent caps (Mietendeckel) affect mainly A-cities.
- Many B-cities remain outside regulated “angespannte Wohnungsmarkt” zones, allowing more flexible rent increases and market-based pricing.
3. Sustainable Growth Potential
- Migration from large, expensive metros continues.
- Remote work and lifestyle shifts make mid-sized cities more attractive.
- Universities and new tech/industrial clusters (Leipzig, Dresden, Magdeburg) stimulate long-term demand for rental housing.
4. Easier Financing & Lower Risk
Banks view many B-cities as stable, low-volatility regions.
For foreign investors, it’s easier to secure financing for a well-located property in Leipzig or Nuremberg than for a small flat in overheated Munich.
Best-Performing B-Cities in 2025–2026
City | Avg. price (€/m²) | Avg. rent (€/m²) | Gross yield | Outlook |
Leipzig | 2,800–3,200 | 9–11 | 3.8–4.2 % | Very positive (tech & logistics boom) |
Dresden | 3,200–3,600 | 10–12 | 3.5–4 % | Stable demand, limited supply |
Nuremberg | 4,000–4,500 | 12–13 | 3.3 % | Strong industrial base |
Magdeburg | 2,500–2,800 | 8–9 | 4–4.5 % | E-mobility investments (Intel plant) |
Augsburg | 4,200–4,700 | 12–13 | 3 % | Proximity to Munich, steady growth |
What to Consider Before Investing
- Mietspiegel check: Ensure realistic rent calculations based on local benchmarks.
- Demographics: Look for cities with population growth and university inflows.
- Infrastructure & employers: Economic anchors (tech parks, logistics, automotive).
- Management: Use a reliable Hausverwaltung — remote ownership requires local control.
- Tax & financing: For foreign investors, structure via GmbH or private purchase depending on income strategy.
Dominart Insight: The B-City Advantage
“In B-cities, you can still find buildings where the annual rent equals 20–25 times purchase price — something impossible in Munich or Hamburg.
For investors seeking steady income and manageable entry prices, the B-market is where Germany’s real opportunity lies.”
— Dominart Invest Research, 2025
Summary
- B-Cities = Higher yields + Lower entry costs + Less regulation.
- Ideal for investors focused on cashflow + capital appreciation over speculation.
- Key strategy for 2026: diversify beyond Berlin & Munich into regional centers with strong fundamentals.
