German housing heads into deficit but solutions unclear

Germany is heading into a shortage of housing that, if unheeded, could lead to a deficit of some 770,000 homes in the south-western state of Bavaria by 2025, a residential housing conference in Berlin heard recently.

The conference took based its discussion on conclusions from a study by the Eduard Pestel Institute, reported Arne Degener, Editor of Berlin's Immobilien Weekly newsletter. The shortfall will occur not only in major conurbations but also in some regions of east Germany. Bavaria, for instance, needs 1.4m new homes by 2025, and Thuringia 62,000. However, only 35,000 new permits were issued in the former last year, and 2,200 in the latter.

The Berlin Forum - convened by federal housing and building associations and with the participation of several parliamentarians - had no solution to offer. "Instead a number of conjunctive `maybes' and `could be's' were presented, which were not particularly helpful in soothing the palpable frustration of the audience," Degener wrote. "Despite vague remarks from the politicians on the stage, one thing was clear... Even if at the moment no one really knows exactly how house-building can be made more attractive for entrepreneurs, the number of proposals put on the table showed some movement is coming into this discussion. This could be fiscal support via changes in the write-off guidelines, targeted subsidy or certificate programs; the range of ideas is very varied."

The Pestel Institute study, written by Matthias Günther and Lothar Hübl, assumes that Germany's population will fall by 2.93m people by 2025, while the number of private homes needed will rise by 1.53m as the average household size falls to 2 persons from 2.16. Demand for housing will range between 250,000 units p.a. up to 2013, and then fall to average 150,000 over the next 12 years.

Separately, the home ownership data for Germany shows that an unchanged 43% of the population live in their own houses, and that the rate has not changed at all since 2003. However the figures show a marked divergence across west and east German states.

In terms of values, the German real estate community is taking heart from the fact that Germany's giant electronics and heavy plant conglomerate Siemens disposed of around 4,000 residential units to a public-private consortium recently for e320m, equating to a floor price of e1,100 sq.m. This is a relatively buoyant price compared with rates well below e1,000 in many of the large portfolio transactions of recent years. It is significant however that the apartments are all in southwestern Germany. Buyer was a consortium of public housing groups, which accepted stringent conditions on rent rises in future years. pfe

(Full story published in Property Investor Europe 115. Register now for a free trial)