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Housing Construction Boom Falls Short of the Mark

Germany's metropolises are plagued by strained housing situations – which has caused prices and rents to surge. The most sensible response to the high demand is to relieve the strain through stepped-up housing construction. Something long assumed has lately been backed by statistical evidence: The most recent figures released by the Federal Statistical Office (Destatis) on housing construction show a building boom. During the first semester of 2014, a total of 136,800 flats were approved in Germany, which is 9.6 percent or 12,000 flats more than during the reference period in 2013. According to the Statistical Office, the current year to date has thus seen a continuation of the favourable trend registered over the past four years (+5.2 percent in 2010, +27.9 percent in 2011, +4.9 percent in 2012 and +9.6 percent in 2013). Yet one thing is quite obvious: Housing construction is still not keeping up with rising demand, least of all in Berlin.

Increase in the Number of Multi-Family Residential Buildings and Condominiums

The number of new residential units approved during the first six months of this year totalled 118,700. This equals a year-on-year increase of 7.3 percent. While the number of planning permissions for detached and semi-detached homes declined slightly (by -1.0 percent and -0.4 percent, respectively), there was an increase in the number of flats approved in multi-family residential buildings (+12.8 percent) and condominiums (+14.3 percent). The steepest year-on-year increase in planning permission was registered for works in existing buildings as +31.6 percent.

Housing Construction in Berlin Still Not up to Speed

Even and especially in the nation's capital, housing is in short supply. Berlin's Senate, the city government, is well aware of the need for housing development, and cooperates with property developers in order to expedite residential construction. In late June of this year, for example, it signed a housing construction alliance with the boroughs that stipulates the development of at least 10,000 new flats annually between now and 2025, financed either by private investors or by the state. This year is expected to see the completion of 6,800 flats – not nearly enough when matched with the number of almost 42,000 residents who moved to Berlin last year alone.
This means that the demand for new housing continues to go unmet in Berlin. A recent survey conducted by the research and consultancy firm of bulwiengesa revealed that the number of flats needed in the next five years will be around 20,000 annually, or roughly twice as high. The survey identified more than 190 distinct projects now under construction that will deliver a total of around 13,900 flats in the German capital. It will be a while yet, though, before these will enter the city's housing market. Demand for flats in existing buildings is thus unlikely to abate any time soon, and continues to present a lucrative investment opportunity for private investors in the coming years.