German Housing Market Continues to Show Impressive Crisis Resilience
As recently as March, some forecasts projected a serious set-back for the German housing market due to the corona virus crisis—with the Empirica institute, for one, talking about a dip of up to 25 percent—but it is now becoming increasingly clear just how valiantly the housing market has stood its ground during the crisis. The latest figures released by the F+B real estate research company suggest as much because they show persistently stable price growth for condominiums in Germany and no sign of a set-back.
On the national level, average asking prices have actually seen modest growth since the onset of the crisis. Having still stood at 3,718 euros per square metre in the tenth calendar week, or early March, they had ascended to 3,930 euros by the 21st calendar week, meaning by the end of May. This equals a nationwide increase by 5.7 percent. In the “Big Seven” cities, prices maintained their average level during this period, allowing for certain regional differences. While prices in Frankfurt declined noticeably, fast price growth was reported from Hamburg and Stuttgart, for instance.1
Declining Number of Flats on the Market
According to the “Die Welt” daily, the appraisal company Sprengnetter analogously observed a stable or indeed upward selling price performance in Germany. Its figures show that prices in the country’s ten largest cities have gone up by five percent since January, with the national growth rate as high as seven percent.2
The price stability demonstrates that demand for residential real estate remains strong despite the crisis. Conversely, the number of housing market listings has declined for the time being – according to F+B the volume of condominium listings contracted by around 13 percent between early March and late May. The fact that supply is drying up at a time when demand remains strong probably explains why prices are actually rising in many places. And if you take a close look at the current construction stats, they appear to suggest that the housing shortage is here to stay long-term.
Housing Construction Lags far behind Targets
Although housing construction in Germany has admittedly gathered momentum, it is still not up to speed: the 293,000 flats completed in 2019 imply a year-on-year increase by merely two percent. It is all very well that it represents the highest year-end total since 2001, as the Federal Statistical Office pointed out. But the housing development target of 1.5 million flats by 2021, which the German Government had proclaimed in 2017, remains as elusive as ever. To achieve this target, 375,000 new flats would have to be built annually, whereas the actual completions total failed to clear even the mark of 300,000 last year, the same having been the case in previous years.3
Neither has the number of planning consents scratched the target mark of 375,000 flats (with 360,600 approved flats in 2019). When you bear in mind that not every flat that was approved will actually be built, then it is reasonable to assume that the completions figures will keep trailing the targets for some time to come.