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27 02 2014
Vacancy Rate Keeps Going Down – Making the Need for Development More Pressing

Long queues at apartment viewings have become a familiar sight for flat hunters in many places in Germany. It is easy to see why: While the supply of flats to let in existing buildings is drying up fast, housing construction lags hopelessly behind demand. Residential voids in Germany continued to decline in 2012 – or so the findings of the latest vacancy index published by the estate agency CBRE and the research institute empirica suggest.

According to the index, the vacancy rate for flats in multi-dwelling units was down to around 3.3 percent across Germany. It is the equivalent of 688,000 units nationwide that are either on the market now or could come on-stream in the medium term. As recently as year-end 2011, around 720,000 flats were still to let. So the vacancy rate has dropped for the sixth time in as many years – hitting an absolute low of 0.5 percent in Munich. The analytic findings of CBRE and empirica are based on the property management data of CBRE as well as on the analyses and estimates sourced from empirica's regional database and from the Federal Statistical Office. The survey was limited to flats that are ready for occupation and actually available to the market.

Strong Dynamics and Declining Vacancies in Growth Regions

The city with the lowest vacancy rate is Munich, followed closely by Hamburg. Flat-hunting is much easier, but contrast, in many places in East Germany. Meanwhile, the divergent developments in contracting versus growing regions offer much more meaningful explanations than the often-cited East-West gradient: Vacancy rates in regions with negative demographic growth have been stagnant for years, but have steadily declined in growth regions.

Increasing Demand Boosts Need for New Housing

What may seem like an auspicious short-term outlook for landlords could have negative ramifications for the letting market in the long run. To be sure, drawing on vacancy reserves helps to ease the strain on the housing market for the time being. Especially fast-growing cities like Berlin benefit from the massive flow of incoming migration and the absorption of vacant housing stock. But the construction of new homes has failed to stay abreast of surging demand. Moreover, what little housing construction there is remains limited in many cities to condominium developments at the upper end of the price spectrum. As this will hardly relieve the housing market, what the situation truly calls for is housing construction across segments. Naturally, this would presuppose an ample supply in land zoned for residential purposes. As CBRE and empirica point out, it is high time that properties not utilised so far are cleared development soon.