Real Estate
Analyses of the situation in the construction sector and studies on the real-estate market both in Germany as a whole and in selected centres in Germany and abroad.
House prices
European house prices: German cities still have potential – medium-term correction looming
Our analysis of 200 European cities shows that housing in Germany is too cheap rather than too expensive. However, state intervention in the market threatens to continue damping rent increases. Together with Germany's rapidly ageing population there is the threat of a market correction at the end of the cycle. The correction is likely to be more pronounced the longer the house price cycle continues.....(go to p. 18) [more]
Talking Point
Germany: Is housing policy heading towards the precipice?
It will take many years to reduce the demand overhang in the housing market if there is not a huge jump in building activity. This harbours the risk that the current phase of prices returning to normal could first lead to overshooting and end in a market correction. This scenario comes with high economic costs. These could be avoided by improving depreciation conditions for newbuild housing in Germany's large cities and metropolitan regions. [more]
Misguided policy raises risk of housing bubble
Politicians should focus on an expansion of building activity in the major cities and conurbations in order to reduce the upside pressure on house prices. In the past few months there have been indications of easing activity in the construction sector. If this trend materialises, the pressure on house prices will intensify further. One possible cause of this development is capacity restrictions, and a lack of suitable skilled labour in the finishing trades in particular. An immigration law that specifically focuses on bottlenecks in the labour market could help to bring about some relief. If it becomes obvious over the next few months that construction growth is going to remain sluggish long term, rent control should not be implemented in the regions. [more]
Real Estate
Construction investment: Sharp increase expected, but focus on downside risks
Despite the unbroken upswing in the real estate market since 2009, construction investment has grown only moderately at around 3% per year. This corresponds to a relatively low price elasticity of only about ½, since prices have climbed by roughly 6% per year. This expansion of construction investment started from a low level. As a percentage of gross domestic product, German construction investment is relatively low both by historical and international standards. (go to page 5) [more]
Spotlight on Germany
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