Pressure on German Housing Markets Keeps Rising
Between 2012 and 2018, Germany’s population increased by a total of 2.5 million residents. At the same time, a disproportionate number of younger people moved to the country’s major cities, as the Federal Statistical Office recently disclosed. On balance, cities with populations of more than 100,000 gained 1.2 million residents of the ages 20 through 40 while losing only 120,000 residents over the age of 40. This implies a general trend of urban populations growing and getting younger. The cities with the fastest demographic growth are Leipzig with a rate of 12.9 percent, Frankfurt am Main (9.5 percent) and Berlin (8.0 percent).1
Especially cities have experienced corresponding price hikes because of “the keen demand for condominiums and because of the short supply in residential accommodation,” as Georg Thiel, the President of the Federal Statistical Office, reported.2 Even in the years 2016 through 2018, when some people already predicted a trend reversal,3 condominium prices in the “Big Seven” cities kept going up at an average rate of 23.4 percent. Among the other price drivers that Thiel cites are rising construction costs, which increased by nearly 25 percent between 2008 and 2018.4
Number of Single-Person Households Declining in Metropolises
It is probably because of the housing shortage and the risen condominium prices that the average dwelling floor area per person and the number of single-person households in the “Big Seven” cities have both declined: It appears that big city dwellers have to move closer together. Between 2010 and 2018, the average dwelling floor area shrank by 1.7 percent to 39.2 square metres while the share of single-person households dropped from 51 down to 45 percent. This is remarkable insofar as it runs counter to the trend in Germany as a whole.5
In short, the pressure on the Germany’s housing markets is tremendous, and nowhere more so than in the metropolises. For what it’s worth, the report by the Federal Statistical Office also contains a piece of good news, namely that multi-family residential construction has picked up momentum lately, specifically in the major cities. While only 39 percent of the flats completed in Berlin were located in multi-unit dwellings in 2008, their share had gone up to almost 90 percent by 2018. The gap between multi-family residential construction, on the one hand, and completions of detached and semi-detached homes, on the other hand, has also increased noticeably nationwide since 2015.
But the main problem now, as then, is the enormous backlog in construction. According to the Federal Statistics Office, the construction backlog amounts to 693,000 flats that, while approved, remain uncompleted. Eliminating this backlog would ease the strain on the housing markets – but only temporarily, as the number of planning permissions began to decline again in 2015, which suggests in turn that the completions figures will start decreasing, too, in a few years’ time.