Real estate markets

Germany: Exaggerated prices becoming far more numerous in the housing market

Sentiment in both the German housing market and the construction industry is buoyant overall. Unlike the situation a few years ago, when the property market had to hunt hard for buyers, in large parts it is now decidedly a seller’s market. Thanks to low interest rates at present loan instalment payments are usually not higher than the comparable rent. The strong willingness to buy is also fuelled by good labour market conditions and rising levels of disposable income. Moreover, the strong demand among prospective owner-occupiers is buttressed by investor interest, as the return on rents remains significantly higher than the yield on bonds. For this reason, the flats and houses on offer are swiftly absorbed by the market, and usually at high prices. At the same time, construction companies’ capacities are largely fully utilised, meaning they are hard-pressed to keep up and complete the requisite number of dwellings; the gap…

Construction permits: despite a sharp rise, still failing to match demand for new housing

In mid-November, the Federal Statistical Office published new figures on permits for residential construction in Germany. They show that in the first three quarters of the current year permits rose by a considerable 24% to around 276,300 compared with the same period in the previous year. This is a positive development, as the shortage of properties is contributing to the rapid rise in property prices in many Germany conurbations. Despite this, residential construction still lags demand for new housing. Should the current trends continue, we can count on 370,000 residential construction permits for 2016 as a whole. Completions are likely to increase by some 9% to 270,000 residential units, meaning that residential construction remains well below the figure of 400,000 homes per year, which are required according to property experts. The longer the trend persists, the greater the number of homes which will have to be built in the years…

Risk of an overheating housing market calls for proactive measures

In large parts of Germany, real estate prices have only headed in one direction for the sixth year in succession, namely upwards. And not only that, the pace of price increases accelerated even further last year. According to figures of the Association of German Pfandbrief Banks, prices for residential property in Germany had already risen by more than six percent by mid-2016 compared with the summer of 2015. A point worth noting – this is the nationwide average for price developments as well as the average across the various real estate types, such as detached houses and appartments. In some structurally weak areas prices are actually in decline, with some houses still unable to find a buyer even after several months. This means that the uptrend in prices is all the greater in the majority of business centres. For owner-occupied appartments in the major cities, the price gain has already…

Germany – investors like commercial property and multi-family dwellings even if they come at a price

Property investors have had plenty to worry about in the last few years. The flats constructed in the wake of the reunification boom in Germany resulted in high vacancy rates and a sharp fall in rents. Soon afterwards, the office property markets crashed when the new market bubble burst and following 9/11, as it became virtually impossible to let space in the office towers constructed during the years of the dot com hype. Some of the shopping centres built in the 1990s also turned out to be simply too much of a good thing in view of stagnant retail sales. Today, the situation is much brighter with regard to commercial property, although not all locations are flourishing. Structurally weak regions with a high level of migration from the area are not necessarily doing well. Among the clear winners are central German property markets in the country’s seven biggest cities –…

Unparalleled mood on the German property market

German Olympians have not quite found their groove in Rio. Germany is yet to reach double figures in the medals table and therefore has quite a way to go if it hopes to match its sporting achievements of the past. By comparison, after many years of decline, the current mood in the domestic property market can almost be considered record-breaking. This is reflected in the property price index for the second quarter that has been released by the Association of German Pfandbrief Banks (vdp). This reports a year-on-year increase of 6.3% in the vdp price index for owner-occupied housing, which is the strongest improvement since the index was first compiled in 2003. Even greater growth of 7.3% was recorded for condominiums, while the rise for single-family and semi-detached houses was slightly lower, at 5.9%. Overall, price rises are therefore considerably higher than at any point in the recent past, moving…

The German housing market is gradually heating up

The strong surge in housing prices continued in Q1 2016. The prices for owner-occupied homes rose on the year by 4.7 percent, the growth rate in multi-family dwellings was even more pronounced, at 8.0 percent. In the big cities, price increases cooled in the interim but have since picked up again, with owner-occupied flats becoming some 9 percent more expensive.  Neither the fact that prices have already rocketed nor the tangible expansion in residential construction were able to dampen the price hike. Four factors have driven this: Firstly, the basic economic conditions for the housing market are better than at most points in the past. Secondly, the interest rate slide results in lower mortgage payments, despite the increase in house prices.  Thirdly, rental returns that can be achieved in the housing market remain a much-sought alternative to the bond market. And fourthly, housing supply is still tight, as, despite the…

1 5 6