German housing: problems and prospects of the market
German housing in Germany has overtaken commercial real estate in popularity. In the country, transaction volumes for houses and apartments exceeded those for commercial properties, marking the first time since 2013. A total of €56 billion was invested in housing and €59.3 billion in commercial real estate.
Colliers experts say the increase in facility prices and the impact of the pandemic are not affecting long-term trends in the market. People have a growing need for housing, and demand will increase at least until 2030. By that time the number of households will grow by 3%, and in large cities the figure could reach 6%.
Analysts predict that by 2040 the number of households in Germany could increase to 19.3 million units, 2 million more than at present. In addition, the residential sector accounts for 42% of the total number of units in the local real estate market, and will continue to grow in the coming years. Therefore, investors need to consider such trends before making a decision about investing in one project or another.
The main problem on the German market is the limited supply of residential properties. The shortage of sites has become more acute in recent years. According to experts, to meet the growing demand, about 600 thousand new apartments, which the market now has.
The main factors that hinder the development of the segment are high construction costs of facilities, regular tightening of safety rules and regulatory requirements. In addition there is a probability of limiting the maximum limit of rental rates. This situation could mean that the cost of buying apartments will continue to rise, while rents will remain at the current level.
As for the conditions for institutional investors, experts note the stability in terms of price dynamics. The cost of renting housing is increasing more evenly than rates for office space. Compared to 1990, the rental price has almost doubled. Moreover, crises, pandemics, and the slowdown of the world economy had no significant impact on the growth of rates.
It should be noted that for more than 20 years rents in Germany have not been volatile. In addition, the prospects of market development are quite optimistic, primarily due to changes in the country in social terms. As a result, rental income can be seen as a profitable investment decision, which in the long term will steadily generate income. Low interest rates, which make it easier to buy a home for rental purposes, also contribute to the development of the market.