Seven fat years?

Seven fat years for the Federal Republic of Germany and especially for the domestic property market have been forecast by Daniel Gross, Director of Brussels’ economic research centre CEPS, and even critical economists like Hans-Werner Sinn, President of the ifo Institute in Munich, agree. We do not yet have any faith in this, for in the last few years we have all too frequently announced that we had already reached the nadir in housing construction in Germany and the only way was up.

 We still have a high percentage of vacant flats in most regions of Eastern Germany, and in parts of the Ruhr district and in the rural areas of Germany too there remains a surplus of flats and houses. But in the meantime the first positive trends can be identified. Especially in the prospering cities of Hamburg to Dusseldorf/Cologne and Frankfurt to Stuttgart und Munich, the housing market is getting tighter. Rent and price increases of over 10 percent within a year are the norm. Now it is obvious that especially in these cities far too few houses and flats have been built in recent years. And the housing surplus built in the boom years following German Reunification has now been absorbed by the market too.

 Housing construction will also profit from the fact that other investment options currently earns low or no returns. With rising rents and historically low construction interest rates, it is sensible for investors to invest in building rental property as well as for tenants to think about buying their own homes. With looming inflation, which is predicted by more and more experts, so as to allow the governments to write off their debts, property owners are on the safe side. And as Germany ranks with Switzerland at the bottom of homeownership table, there is still a lot of headroom. Moreover, almost nowhere else in Europe are so few housing units built per capita of the population.

 Even the mood of the Germans, who are generally regarded as particularly pessimistic, seems to be improving well. Consumer confidence is growing strongly. Not least because any worries about losing jobs have been abated. In October 2010 unemployment figures in Germany were for first time as low now as they were just under 20 years ago. Experts are even expecting the level to dip below 2 million within the next two years.

 Overall the outlook is rosy. We hope that these rational considerations will be sent down from the head to the “gut”, as gut feeling is often the clincher when it comes to far-reaching decisions such as building a house.

Martin Roth
General Secretary of the Federal Association of the German Brick and Tile Industry Regd, Bonn

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