Housing and Property Markets in Germany 2011 - Bundesinstitut für ...

4 Housing and Property Markets in Germany 2011 | Situation und perspectives of the property marketssmaller households can no longercompensate for the natural andmigration-based population losses.The consequence may be thedemolition of residences and otherbuildings or lack of renovation workif the rental income and reserves nolonger allow for investment.The property markets arebecoming more and moredifferentiatedIn particular, the changes in housingrental prices, property prices anddisposable income point to a furtherincrease in the differences betweenthe regional property markets. Thegap between „affordable“ and“expensive“ areas has expanded yetagain over the past few years (seeMap 2). At the same time, though,the differences for completedconstruction projects, which aregenerally in decline, are diminishing– only the prosperous regions exhibitsomewhat smaller decreases thanother areas. A greater differentiationof the markets and, above all, theproperty prices can be expected infuture. Apart from economic anddemographic factors, the areasare increasingly subject to internalaspects regarding location, housingdesign and the quality of the propertyin general – also in terms of energyissues.Suppliers of residentialrental property arebecoming moreinternational and moreprofessionalAs before, non-institutional privatelandlords dominate the Germanmarket of residential rental property.These private, small-scale suppliersmanage 14.5 million residential units,that is, approx. 60 % of all residentialrental property, and thus shapethe – by international standards,unusually tight – supply structure.However, diversification can be seenin the supplier structures for housingrentals. Accordingly, professionalsuppliers manage their propertiesBBSR-Analysen KOMPAKT 02/2012Map 2 Heterogeneous trends of quoted rents, 2006 to 2010DKKielHamburg SchwerinBremenPLTrend (annual changes)Continually risingFirst falling, now risingStagnatingFirst rising, now fallingContinually fallingHeterogeneousNLHannoverPotsdamMagdeburgBerlinDynamics (complete period)Rising significantly (at least 6 %)Rising slightlyDüsseldorfErfurtDresdenLawFallingBELUMainzWiesbadenCZSaarbrücken66 66 38 40 3 209 62 155 167 38FrequencyFrequencyFRStuttgart100 kmCHMünchenAT© BBSR Bonn 2011Data source: BBSR Housing Market Monitoring System,IDN ImmoDaten GmbH;Geometric basis: BKG, administrative districts (modified)31.12.2009Note: In Brandenburg, internal differentiation ofadministrative districts by suburbs and outerdevelopment areas. Regional district of Hanover andurban region of Aachen, differentiated by city and formersurrounding area.

Housing and Property Markets in Germany 2011 | Situation and perspectives of the property markets5in an increasingly international andprofessional fashion. In terms ofregional aspects and developmentstructures, there are significantdifferences among the suppliers ofresidential units. In urban regions,professional owners often dominatethe market, while private, small-scalesuppliers tend to be more common inthe suburbs and rural areas.Figure 1SlovakiaNorwayBelgiumFinlandVarious developments in the housing prices in Europe, 2009 and 2010BBSR-Analysen KOMPAKT 02/2012Residential propertymarkets suffered lessthan commercialproperty markets duringthe financial crisisThe residential property marketsmanaged to weather the 2008/2009financial crisis better than thecommercial property markets.The sharp fall in prices, rents andtransactions in the commercial sectorwere caused by the close correlationbetween current market events andthe utilisation of property. Loans inthe commercial area were frequentlyissued more reluctantly than wastrue of those granted to privatehome buyers. Since 2010, however,commercial property markets haveseen some improvement.The price trends in the residentialproperty markets are less volatilewhen compared to other countries.Germany had not created a propertyprice bubble like Ireland or Spain inthe lead-up to the financial crisis,and even during the crisis pricesbarely declined or only fell slightly(see Figure 1). The reasons for thisinclude a financing market focusedon security with multi-year andfixed interest rate contract periods.Germany also has a strong andattractive residential rental marketwith stable rental price trends andextensive tenant protection rights.This segment offers freedom ofchoice between ownership andrenting. Changing preferences asto where people want to live andprofessions that require higherlevels of mobility have also created acorresponding demand in the rentalproperty segment.SwedenSwitzerlandSloveniaAustriaGermanyDenmarkFranceMaltaPortugalNetherlandsIcelandItalyHungaryUKPolandSpainGreeceCyprusIreland-20 -15 -10 -5 0 5 10Year2009 2010Changes in price from previous year in %Note: The information refers to December or the last quarter of the year. The chart shows annualised data. The information on property prices may differ in quality, scope and currency. The data shown here are based on price indices for all residential property and/or prices for single-family homes if no other price indices are available. Excluded hereunder are the Baltic states where the data are based only on housing prices in capital cities.Data sources: State agencies for statistics, central banks, ministries of housing. Supplemental datasources: RICS Cyprus, Cyprus; FNAIM, France; Hypoport, Germany; FHB, Hungary; ESRI-Permanenttsb, Ireland; Scenari Immobiliari, Italy; REAS, Poland; Ci-Iberica, Portugal; Wüest, Switzerland; and Lloyds-Halifax, United Kingdom.Source: Royal Institution of Chartered Surveyors RICS: European Housing Review 2011. – London 2011, S. 615

6 Housing and Property Markets in Germany 2011 | Situation und perspectives of the property marketsThe German propertymarkets have generallyfared well in the financialcrisisUntil mid-2011, the news aboutGermany‘s economic developmentwas largely positive, whether itinvolved economic forecasts orthe trends in the labour market andunemployment. The German labourmarket has shown itself to be solid.There was a marked accelerationin gainful employment, as wellas jobs subject to social securitycontributions, in 2010 and the firsthalf of 2011, causing unemploymentto drop. Surveys show also positivetrends in the property industry,indicating that there is potential toreduce the apprehensions amonginvestors and home builders that arebased on uncertainty and scepticism.The first signs of this can be seen inthe again-rising number of residentialconstruction approvals and increasednumber of property transactionssince 2010. Germany is internationallyrecognised as a stable location forinvestment. German real estate isknown to be a secure investment.In particular, the rising rents arean important criteria for profitexpectations.Risks to the economy can primarilybe seen in the global economicenvironment, the stability of individualEU member states and the euro aswell as, to some extent, in the as-yetunstable conditions of the bankingsector. The financial problems inmany municipalities also appear to bea problem for local property markets,in particular, as concerns the abilityto steer local investment.The propertybusiness has goodgrowth prospectsThe 2011 spring report by the GermanCouncil of Real Estate Expertsreinforces the positive reputationof Germany as a relatively low-riskinvestment location, meaning thatincreased international investmentis likely in the future, with propertybeing in particularly high demand asan investment, which could translateto positive trends in terms of rentprices and property prices along withnew construction.National demand, too, can rely onseveral favourable factors regardingproperty investment. Though rising,mortgage interest rates are stillrelatively affordable, thus creatinggood financing conditions for theacquisition of real estate (seeFigure 2). The European CentralBank‘s (ECB) moderate key interestrate increases in April and July 2011will probably have medium-termeffects on construction industryinterest rates. The positive labourmarket trends make for improvedframework conditions affecting thegranting of mortgage loans.BBSR-Analysen KOMPAKT 02/2012Figure 2Effective interest rates for residential buildings 2003 to 2010 –the current level still offers financing conditionsInterest rate in %65432003 2004 2005 2006 2007 2008 2009 2010 2011Month / YearNote:Effective interest rates, banks, Germany; new business; homebuilding loans to private households, initial fixed rate for ten years.Data source: Deutsche Bundesbank: Time Series SUD 119

Housing and Property Markets in Germany 2011 | Specific current and future housing market trends7Specific current and future housing market trendsBBSR-Analysen KOMPAKT 02/2012Currently, rents are increasing ona broad basis; property prices areshowing more differentiated trends.Overall, the positive price dynamicis strongly focused on good andprime locations, high-qualityproperties as well as prosperouscities and regions. AcrossGermany, investment in existingresidential properties exceeds thatrelated to construction. Only 20 %of the construction volume goestowards the construction of newhousing units. But after 15 yearsof decline, the latter is gatheringsteam again.Figure 3Housing rent prices areon the rise, property pricedevelopments appearmore heterogeneous,characterised by regionalprice differencesOn average, rent prices for housinghave increased throughout thecountry. In addition to urban areas,rural areas have also seen rent pricesincrease again. Property prices tendto be slightly positive or negative,depending on the segment (seeFigure 3). Stagnating and/or fallingprice trends can be seen primarily inshrinking regions.Some segments show sustainedprice increases – good residentiallocations and property quality inprosperous cities are marked byparticularly dynamic developments.They are preferred primarily byinvestors. New buildings appearmore stable in terms of value thanexisting properties. New owneroccupiedhomes have done betterthan condominiums.Trends of selected property price indices in Germany between 2000 and 2011 –heterogeneous, with currently positive trendsHypoport home price indices 2005 to 2011 (HPX hedonic) Vdp price index for owner-occupied housing 2003 to 2011Index 8.2005 = 100 Index 2003 = 100115 115110105100951101051009590 9085858.05 2.06 8.06 2.07 8.07 2.08 8.08 2.09 8.09 2.10 8.10 2.11 2003 2004 2005 2006 2007 2008 2009 2010 2011Month / YearQuarter / YearOwner-occupied homes, newconstruction (HPX new home)Owner-occupied flats(HPX apartment)House price indices 2005 to 2009Index 2005 = 100115Owner-occupied homes, existing Owner-occupied homes Owner-occupied flatsbuildings (HPX existing home)Overall indexHPX overall indexReal-estate indices Deutsche Bundesbank 2000 to 2009Index 2005 = 10011511010510095908585II05 IV05 II06 IV06 II07 IV07 II08 IV08 II09 IV09 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Quarter / YearYearHouse price index Price index for turnkey Terraced houses, Terraced houses,(new construction) construction excluding land new construction resalePrice index for existingresidential buildings1101051009590Owner-occupied flats,new constructionOwner-occupied flats,resaleData source: BBSR Housing Market Monitoring System; Hypoport AG; vdpResearch GmbH; house price index of German Federal Statistical Office; calculation by DeutscheBundesbank based on information from BulwienGesa AG

8 Housing and Property Markets in Germany 2011 | Specific current and future housing market trendsThere are significant regionaldifferences in rental and propertyprices. Apart from an extensive pricedifferential ranging from the south viathe west and north to the east, thereis also a significant price differentialbetween cities and rural districts;metropolitan core areas stand outfrom among other major cities (seeMap 3). The gap in prices and rentsbetween booming and shrinkingareas is particularly significant.Housing constructionactivity had declined fora long time – increasednew construction since2010New housing construction declinedfrom the mid 1990s to 2009 (seeFigure 4). This was true of bothowner-occupied homes andmultiple dwellings. Constructionis increasingly concentrated onurban areas. The buildings thereare generally still multi-storey.New construction of detachedand semi-detached houses is ofspecial importance to surroundingcommunities. The housingconstruction volume has reversedits structure since the mid-1990s– now, the market is dominated byinvestments in existing buildings, ata rate of approx. 80 %, rather thannew buildings. These investmentsgo towards modernisation ormaintenance. Some investment isalso taking place in shrinking marketsto assure the marketability and, inparticular, the energy-based qualityof buildings.Map 3 Significant regional rent price differences of quoted rents 2010BremenKielHamburgSchwerinBremenKielHamburg SchwerinBBSR-Analysen KOMPAKT 02/2012HannoverBerlinHannoverPotsdam Magdeburg PotsdamMagdeburgBerlinDüsseldorf DüsseldorfDresden DresdenErfurt ErfurtWiesbaden WiesbadenMainzSaarbrückenMainzSaarbrückenStuttgart StuttgartMünchenMünchen100km © BBSR Bonn 2011Proportional to surface areaProportions based on number of residential unitsRents in new buildings and rents in existing buildings(quoted rents, net rent excl. services) 2010 in € per sq. m.Notes:The two thematic maps represent the level of rents in new buildings and rents into less than 4.50existing buildings for administrative districts and autonomous cities. The spatialrepresentation in the map on the left is based on cadastral areas. In the cartogram4.50 to less than 5.00 on the right, the areas of administrative districts have been reduced or enlargeddepending on the respective number of residential units in multi-family dwellings.5.00 to less than 5.50 The neighbourly relationships remain intact, thus creating a visible distortion.5.50 to less than 6.006.00 to less than 7.00Data source: BBSR Housing Market Monitoring System, IDN ImmoDaten GmbHGeometric basis: BKG, administrative districts (modified), 31.12.20097.00 to less than 8.00Notes:In Brandenburg, internal differentiation of administrative districts by suburbs 8.00 to less than 9.00 and outer development areas. Regional district of Hanover and urban region33 122 100 53 65 27 17 5of Aachen, differentiated by city and former surrounding area.9.00 and more FrequencyInterpretation note:Cartograms offer an opportunity for highlighting the degree to which people or households are affected by the information shown. Above-average rents can be observed particularly in prosperous urban and urbanised regions. The number of rented flats in multi-storey buildings is very high in such areas. Thus, many households pay above-average residential rents. Rural areas are dominated by owner-occupied homes, which means that the relatively lower rents benefit fewer households.

Housing and Property Markets in Germany 2011 | Specific current and future housing market trends9BBSR-Analysen KOMPAKT 02/2012The first signs of an easing ofthe negative trend in housingconstruction have been visible since2010. Construction permits rose 7 %compared to the previous year, in thefirst half of 2011 they even climbed by28 % compared to the same periodin the previous year. Constructionactivity in 2010 increased by 0.5 %to almost 160,000 units. Furtherexpansion is expected in 2011 and2012 due to the large number ofconstruction permits issued.Map 4DKThe demand for housingspace will increaseslightly in the futureAccording to the BBSR HousingMarket Forecast 2025, demandfor housing space is expected toincrease by around 6 % by 2025. Thisincrease will be driven exclusivelyby owner-occupied households. Thisgives rise to an annual requirementof 183,000 new housing units acrossGermany between 2010 and 2025 –154,000 units in the West and 29,000units in the East. Compared to recentdata, the forecast exceeds actualForecast demand for new construction of residential housing, 2010 to 2025 – owner occupied homes dominatedetached and semi-detached housesKiel Kielconstruction activity. It assumes thata higher number of new buildings willbe needed to satisfy a demand that isdriven, above all, by demographics.In the forecast period the demandwill weaken (see Figure 4). Demandfor new construction is concentratedmainly on “islands of growth”: inlarge parts of West Germany, alongwith the cities of Berlin, Potsdam andtheir immediate surroundings in EastGermany (see Map 4). Detached andsemi-detached homes will make uptwo-thirds of the forecast demand fornew construction.DKmultiple dwellingsHamburg Schwerin Hamburg SchwerinBremen BremenPL PLNLHannoverBerlin BerlinHannoverNLPotsdamPotsdamMagdeburg MagdeburgDüsseldorf DüsseldorfDresdenErfurtErfurtDresdenBE BEWiesbaden CZ Wiesbaden CZLUMainzLUMainzSaarbrücken SaarbrückenFR StuttgartFRStuttgartMünchen MünchenAT ATCH CH100km © BBSR Bonn 2011Average annual new construction of residential unitsper 10,000 inhabitants, 2010 to 2025No demand for new construction0 to less than 1010 to less than 2020 to less than 3030 to less than 400 120 204 101 10 4 208 151 60 15 4 1Frequency detachedFrequency40 and more and semi-detached houses multiple dwellingsData source: BBSR Housing Market Forecast 2025 (lower variant)Geometric basis: BKG, administrative districts, 31.12.2006

10 Housing and Property Markets in Germany 2011 | Specific current and future housing market trendsFigure 4Residential units completed300 000Current construction activity since 1992 and forecast demand for new construction up to 2025250 000200 000150 000100 00050 00001992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024YearConstruction activityNote: residential units completed in newly constructedDetached and semi-detached houses, former West-German statesForecast residential buildings, excluding rooming houses,statisticsincluding extensive late registrations in the city ofMunich in 2004 and 2006Multiple dwellings, former West-German statesData source: BBSR Housing Market Monitoring System;German Federal Statistical Office: Special series 5,Detached and semi-detached houses, former East-German statesSeries 1 Construction activity; BBSR Housing MarketMultiple dwellings, former East-German statesForecast 2025 (lower variant)BBSR-Analysen KOMPAKT 02/2012Map 5Vacancies in multiple dwellings 2009 – A problem in the East and WestDKActive-market vacancy rate inmultiple dwellings 2009 in %Kielto less than 2.5BremenHamburg SchwerinPL2.5 to less than 5.05.0 to less than 7.57.5 to less than 10.0HannoverNL PotsdamBerlin10.0 and moreNumbers statistically uncertainMagdeburgDüsseldorfErfurtDresdenData sources: BBSR Housing Market Monitoring System,empirica vacancy indexGeometric basis: BKG, administrative districts, 31.12.2009BEWiesbaden CZLUMainzSaarbrückenFR Stuttgart116 185 74 25 12 25Frequency100 kmMünchenATNote:For the purposes of the active-market vacancy rate, unrentedrental units are defined as being vacant. The empirica vacancyindex is constituted from day-to-day information on the rentalsituation of the residential stock under review. The index usesinformation for 11% of the entire stock of multi-storey buildings inCH Germany. As the index does not include economically abandonedand substandard units (coal heating), these vacancy© BBSR Bonn 2011 rates are below those of other surveys (e.g., micro census).

Housing and Property Markets in Germany 2011 | Specific current and future housing market trends 11BBSR-Analysen KOMPAKT 02/2012The extent to whichhousing units remainvacant is defined, inparticular, by marketconstellationsVacant property can be foundprimarily in East Germany, but also inrural areas in the West (see Map 5).The vacancies are the result ofdiverse market processes. Growingregions have a high level of demandfor residential units, and propertyowners feel more secure aboutrefinancing investments. In regionswith lower demand, people lookingfor homes have a wider choice,while suppliers of housing unitstend to be grappling with vacancies.The relationship between rent,furnishings and location dictate howeasily a property can be rented. Inthe future, high vacancy rates canbe expected in eastern Germany, inold-industrialised regions of WestGermany as well as parts of northernand eastern Bavaria along withLower Saxony.The housing markets inEurope are displayingvery different trendsThe residential property markets inEurope are extremely diverse. Thefinancial market crisis in 2008/2009hit European countries in verydifferent initial situations, whichmeant the intensity of the impactdiffered greatly. Some countries witha high volume of new constructionand the formation of property pricebubbles up to 2008 have undergonesubstantial price corrections, whichin turn caused construction demandto be dampened (see Figure 5). Thisis particularly true of Ireland, Cyprus,Spain, Greece and most of the Centraland East-European countries. SomeFigure 5Completed residentialunits per 1,000 inhabitants6.4markets, such as Norway, Swedenand Finland, experienced strong priceincreases of more than 5 % on theirresidential property markets after asharp decline in 2009. By contrast,Austria, Germany, and Switzerlandeffectively did not experience anycrisis-related price declines.The residential property ownershiprates vary greatly within theindividual countries in Europe; from90 % among the leaders Spain,Hungary and Slovakia to 36 % inSwitzerland. Germany with anownership rate of 43 % is actually atthe lower end for Europe as a whole.Multiple constellations for completed housing construction in Europe –Level 2011 and dynamics 2008 to 2012FranceFinlandSwitzerland3.2SpainPortugalItalyBelgiumAustriaNetherlandsCzech RepublicNorwaySweden SlovakiaPolandIrelandDenmarkUKHungaryGermany0.0-100LevelCompleted residential units2011 in 1,000s1005025-50 -10 0 10Change between 2012 and 2008 in %DynamicsDramatic declineSubstantial decline50Slight decline and/orslight recoveryModerate increaseData source: Euroconstruct 2011

12 Housing and Property Markets in Germany 2011 | Demand for housing property and property transactionsChanges in demand for housing property and inproperty transactionsIncreasingly, real estate is used asan alternative money investmentand for pension planning. Owneroccupiedresidential propertiescontinue to be the most popularform of housing among Germans.Residential property ownership atthis time is still relatively affordable,which is frequently focused onexisting building stock. Mosthouseholds rent, especially fromprivate small-scale landlords.Many of the large, professionallymanaged, rental units havemeanwhile gone to internationalfinancial investors. Transactionsinvolving municipal existing stockare much rarer than is commonlyassumed.Home ownership is stillimportant – Demand forand supply of existingproperty are expandingThe home ownership rate roseslightly to 43.2 % over the last fewyears. However, there is still alarge difference between Westand East Germany. The conditionsfor acquiring home ownership arevery favourable due to the lowinterest rates and the moderatehome prices. The affordability ofowning a home has increasedalmost continuously over the lastfew years (see Figure 6). Privatehouseholds are taking out more andmore mortgages to acquire existingproperties. They are a much moreaffordable way to attain the dreamof home ownership and some of theproperties are available in centrallocations. Due to the generationalshift among home owners, thesupply of homes on the market isincreasing accordingly. In particular,childless couples and families withchildren are increasingly opting forexisting properties (see Figure 7).The demographic and economicdevelopments will lead to continuedincreases in the rate of homeownership.Detached homesdominate individualproperty transactionsLots for detached homes dominatetransactions for undevelopedproperties. Even in core cities theshare of property transactionsinvolving building lots for buildingprivate homes is very high, making up90 % of all building lot transactions.Private home lots are primarilypurchased in suburban and ruralareas (see Figure 8), existingproperties tend to be in cities.Some of the transactions involvingundeveloped lots can be seenin delayed construction activity.Detached and semi-detached homeconstruction continues to make upthe majority of construction activity.Due to the significant decline in newhousing construction, transactionsinvolving and investments in existingproperties are playing an ever largerrole. In 2008 there were 2.7 times asmany transactions involving existingproperties with individually builtdetached and semi-detached homesthan there were for undeveloped lots.They are also more important thanthe sale of developed lots for multipledwellings.BBSR-Analysen KOMPAKT 02/2012Figure 6Developments in income, home prices and mortgage rates from 1975 to 2008 –indicate that residential property is becoming more affordableIndex 1975=100 Interest in %3503002502001501005001412108642076 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08YearIndicesInterestNominal per capita income Housing price Mortgage interest ratesData source: DB Research: Wohnungsbaufinanzierung wird persönlicher (Housing finance isbecoming more personal). Frankfurt/M. 2009. = Aktuelle Themen (Actual subjects) 451

Housing and Property Markets in Germany 2011 | Demand for housing property and property transactions13BBSR-Analysen KOMPAKT 02/2012Figure 7Share in %100806040200Figure 8Home ownership 1994 to 2007 – Existing properties more important than new construction27 28731994­1997721998­200038622001­2003Purchase of pre-owned homesCompositedistrict typeCore citiesDensely-populatedsurrounding areaRural surroundingsRural areaCurrent populationdevelopmentGrowingStagnatingShrinkingTotal39612004­200744561994­1997Regional differences between transactions and revenues of undevelopedlots for the construction of individual homes 2008Transactions per 1,000 inhabitants0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.60 10 20 30 40 50 60 70 80 90 100Transactions per 1,000 inhabitants1998­20002001­20032004­2007Purchase of new homesRevenues per inhabitant in €1994­19971998­2000Revenues per inhabitantData source: Expert survey of the working group of the experts' panels and the Higher Valuation Boards, 200963374456396162386634564447532001­ 2004­2003 2007Singles Childless couples Families with childrenData sources: BBSR Housing Market Monitoring System,TNS Infrastest Financial Research: Studies on ”Home Ownership Development in Germany”, 1994-2007Type and scope oftransactions for largelots of existing housingproperties changedgreatly over time –Municipal properties areseldom soldSince the end of the 1990s anincrease could be noted in thesales of larger residential rentalunit portfolios and housing propertycompanies. Portfolio sales by publicinstitutions and private actors areeach responsible for half of alltransactions. Foreign investors havebecome more common as buyerson the transaction market since2004. Since 2006 there has been anincreasing number of re-sales fromprivate investors and a decline inpublic sales.Transactions involving large housingproperty portfolios in 2010 onlyslightly increased compared to theprevious year. Transaction gainscan primarily be found in connectionwith smaller property volumes (seefigure 9), The German residentialproperty market remains attractivefor national and internationalinvestors due to the relativelylow price levels by internationalstandards and the stability of theGerman rental property market.The sales of municipality-ownedresidential property that attractedmedia attention in the past havedeclined sharply. In addition, themajority of municipalities has notattempted any sales and has nointention of doing so in future either.Many municipalities feel that thepublic housing properties are veryimportant and use them to obtainlocal political objectives in termsof housing, urban development andclimate policies.

14 Housing and Property Markets in Germany 2011 | Demand for housing property and property transactionsFigure 9Decline in transactions involving large housing portfolios, 2006 to 2010Number of residentialunits in 1,000s250200150100Number of salestransactions6050403020Portfolio size in housing units100 to less than 800Sale transactions100 to less than 800800 and moreSale transactions800 and more5002nd 1st 2nd 1st 2ndhalf/yr. half/yr. half/yr. half/yr. half/yr2006 2007 2007 2008 2008The energy efficiencyof residential propertybecomes ever moreimportantHalf-year / Year1sthalf/yr.20092ndhalf/yr.20091sthalf/yr.20102ndhalf/yr.2010The ageing of societyincreasingly requiresnew construction forbarrier-free residences100Note:This includes sales of residential stock of 100 or moreresidential units.Data source: BBSR database - residential transactionsFigure 10There are often barriers to accessing thebuilding door or flat doorAccess to building doorMore than 3 steps31.7 % No steps24.8 %BBSR-Analysen KOMPAKT 02/2012The energy efficiency of residentialproperty is a factor of growingimportance. Energy savings and aswitch to renewable energy suppliesare high on the agenda for manyhome owners, renters and policymakers. As a nation leading intechnology and industry, Germanyplays a pioneering role here.As 40 % of the end energyconsumption in Germany is used forheating and hot water in existingbuildings, housing generates about15 % of Germany‘s CO 2emissions.The highest potential for energyretrofits can be found in residentialbuildings constructed before 1978.In all new construction after 2005,heat insulation has been standard.The calculated annual potential CO 2reduction for all the modernisationsteps subsidised under the “EnergyEfficient Renovation” programme isequal to approximately 750,000 tons.Due to demographic trends and thegrowing number of older people,there is growing demand for ageappropriate,largely barrier-freeresidences or accessible residences(see Figure 10). This means thatnumerous investments are needed,not only on the part of propertydevelopers or private landlords butalso on the part of owner-occupantsso that they can improve their qualityof life in old age. Roughly half ofthe households with a member atleast 65 years of age live in housingthat they own. Since it is often notpossible to remove all barriers in preexistinghousing, one objective needsto be the removal of as many barriersas possible.Up to 3 steps43.5 %Note: Households with members 65 years and olderSource: BMVBS: Living in old age, 2011Share in %50403020100Access to flat doorUp to More than No No separation3 steps 3 steps steps between buildingand flat door

16 Housing and Property Markets in Germany 2011 | Focus on housing and urban development policieshouseholds received a housingallowance and 4 million sharedhouseholds (“needs units“) receivedhousing and heating cost assistance- 3.4 million shared households asdefined in the Second Social Code(SGB II) and 0.6 million sharedhouseholds as defined in the SGB XII.The regional structures to providesupport for utilities and housingallowances are characterised, inparticular, by the economic situationin the districts and cities (see Map 6).Regions with high unemployment,such as the Ruhr area or large partsof eastern Germany, also have highlevels of social assistance recipients.Economically prosperous regionsin southern Germany, however,generally have very low numbers ofrecipients.Urban restructuringprogrammes involveremoval and revaluatemeasuresThe programmes „UrbanRestructuring East“ and „UrbanRestructuring West“, jointlyfinanced by the Federal Governmentand the Federal States, have adirect and indirect impact on thedevelopment of housing stock dueto the subsidisation of removal andrevaluate measures. They assume theleading role in programmes for urbandevelopment and in the interactionwith municipalities and other actorson the housing market. The federal,state and local governments financethe programmes jointly.As part of the Urban RestructuringEast programme, which has been inplace since 2002, more than 270,000residential units were removed fromthe market by the end of 2010. Itthus helped to reduce the numberof residential vacancies drastically.The second phase of the programme,which started in 2010, will alsorequire the removal of units from themarket – measures subsidised by theprogramme.Housing policyadapts key areas ofresponsibilityAs part of Federalism Reform I, theresponsibility for housing policywas newly adjusted by transferringsocial housing support entirely to thestates in 2007. In 2010 the FederalStates provided €1 billion in housingsupport along with compensationfrom the Federal Government.The German government furtherexpanded its activities with respectto energy-efficiency improvements,social security for housing and homeownership using the so-called Riesterallowance scheme. In addition, theFederal Government continues tosupport urban development andurban restructuring as well asmeasures to support age-appropriateliving and drafts regulatory standardssuch as those concerning energyefficiencyimprovements and newconstruction.BBSR-Analysen KOMPAKT 02/2012

Housing and Property Markets in Germany 2011 | Commercial property markets in time of economic change17Commercial property markets in times of economicchangeBBSR-Analysen KOMPAKT 02/2012Following substantial declinesduring the 2008/2009 crisis, officeand retail properties are seeing anupward trend in demand and rentsagain. This upward trend, however,is focused significantly on primeor, at least, central locations inprosperous cities. New commercialproperties seem attractive toinvestors only in demographicallyand economically well-placedregions.Office properties incentral locations are indemandThe development of office space ishighly dependent on economic andfinancing factors. It has been veryvolatile over the last few years. Dueto the safety-oriented focus on toplocations as a consequence of thecrisis, demand for office space hasbeen particularly high for inner citiesand on the edge of inner cities. Aftersharp drops over the last few yearsoffice rental prices have recentlyseen positive trends again. Sincethe trough in 2007 office rents haverecovered most strongly in theupper segment in large cities andmetropolitan regions. The differentrent levels between good and lessoptimal locations came togetherslightly with the start of the financialcrisis, however, since 2009 they havedrifted further apart again. A shift inthe trend towards positive growthexpectation for the office marketswas observed only after mid-2010 atthe latest. Since 2008, after the longtermlow in 2007, more offices havebeen completed again (see Figure 11).However, there is some insecurityover the short and medium term, suchas concerning the financial marketsor loan issuance for the numerouspending bridge financings.Measured against the cumulativevalue of property assets in Germany,the office properties come in secondto residential housing, making theman important economic factor.Figure 11Recovery in the development of completed new office construction from 1995 to 2009In 1,000 sq. m. floor space Change over previous in %7 0006 000151055 00004 0003 000-5-10-152 000-201 0000-25-301995 1997 1999 2001 2003 2005 2007 2009YearLeft axisRight axisNew buildings completedApproval of new buildingsPositive trends incompleted constructionNegative trends incompleted constructionData source: BBSR Property Market Monitoring System; German Federal Statistical Office: Statistics onconstruction activity Special series 5, Series 1

18 Housing and Property Markets in Germany 2011 | Commercial property markets in time of economic changeThe transactions forretail properties are verydynamicRetail properties are now tradedwith significant growth rates afterthe collapse during the financialcrisis in 2008/2009. In the first halfof 2010 they revived the transactionand investment market enormouslyand over the course of 2010 grewto equal the transactions for officeproperties. The growing demand isshared among both international andinstitutional investors. The noticeablypositive industry mood can be felt ina combination of the export boom,the recovery on the labour marketand improvement in private consumersentiment. The rent development ofretail shops has been quite diverse,depending on region and location(see Figure 12). While leases in prime(1a) locations (main shopping streets)only shrank marginally between 1998and 2010 (adjusted for inflation), theslightly-less-than-prime (1b) locations(adjacent side streets) sufferedlosses in rental income between fourand five times as large. In the Westand East of Germany, the 1a and1b locations diverged to a greaterdegree than in northern Germany oreven southern Germany.Shopping centre development hasprogressed since 1990 with varyingregional focal points. Over the lastfew years inner city locations havegrown in importance, and now thistrend is also observed increasingly insmaller large cities and medium-sizedcities. One trend affecting this newgeneration of shopping centres ispointing towards a better integrationof those centres with the surroundingstructure of inner cities.Regions with gooddemographic andeconomic factors areattracting more businessactivity and investment inreal estateDue to their close economic links,commercial property marketsare often subject to high levels ofvolatility. This trend is reinforced bythe growing dependency on capitalmarkets, particularly in the core oflarge urban areas. According to thefindings of the BBSR panel of experts,the commercial property marketsin booming regions with promisingfuture opportunities have a clearadvantage when it comes to businessactivity and investment decisions.The market actors surveyed seethe growing regions as the almostonly truly attractive regions forfuture business activity (see Map 7).These are usually regions that servemetropolitan functions.BBSR-Analysen KOMPAKT 02/2012Figure 12Large differences in the real growth of retail leases based on location and city type from 1998 to 2010Index 1998=10011010090807060Large cities and metropolitan areasMedium-sized cities in densely-populatedsurrounding areasIndex 1998=10011010090807060Medium-sized cities in rural areasIndex 1998=100110100908070605050501998 2000 2002 2004 2006 2008 2010 1998 2000 2002 2004 2006 2008 2010 1998 2000 2002 2004 2006 2008 2010Year Year YearLocation types and floor spacePrime (”1a”) location,up to 60 sq. m.Less-than-prime (”1b”)location, up 60 sq. m.Prime (”1a”) location,from 100 sq. m.Less-than-prime (”1b”) location,from 100 sq. m.Note:Information on shop rents in business cores, based on net rents excl. services of completed new leases, for the second quarter of each year (broker information).Data sources: BBSR Property Market Monitoring System. IVD Federal Association: Commercial price comparison list

Housing and Property Markets in Germany 2011 | Commercial property markets in time of economic change19Map 7 Attractive future markets and regions for commercial property from the point of view of actors, 1st half 2010DKFlensburgSchleswig-HolsteinKielLübeckRostockStralsund-GreifswaldQuestions: “Which regions are becoming moreattractive for future business activities in yourview?”“Are there regions where you are active that willbe of less interest to you in future?”BBSR-Analysen KOMPAKT 02/2012BELUNLRuhrgebietRheinlandWilhelmshavenRB Weser-EmsMünsterWuppertalKoblenzOsnabrückBremenBielefeldWestfalenRhein - MainRheinland-Pfalz/ SaarlandTrierDarmstadt100 kmFRHamburgRB LüneburgSchwerinMecklenburg-VorpommernSachsen-AnhaltHannoverWolfsburg-BrauschweigMagdeburgRB Hannover/BraunschweigGöttingen-KasselDessauHalle(Saale) LeipzigBerlinBrandenburgKarlsruheStuttgartRB KarlsruheRB FrankenRB StuttgartUlmCZAugsburgIngolstadtBautzen-GörlitzSachsen DresdenHessen­Erfurt-JenaSiegenMarburg- Nord Gera-ChemnitzGießenFulda ThüringenAachenDüsseldorf-Köln-BonnHessen­SüdBambergSchweinfurt-BayreuthWürzburgKaisers- Rhein ­Saarbrückenlautern NeckarNürnberg-RB Niederbayern/ErlangenOberpfalzRegensburg-StraubingRB TübingenFreiburg RB FreiburgMemmingenMünchenKonstanz-RosenheimFriedrichshafen RB Schwaben/OberbayernCHAT© BBSR Bonn 2011PLCottbusMönchengladbachNumber of mentions10050255Gain in attractivenessLoss in attractivenessData source: BBSR experts’ panel on the commercialproperty market, 2010Geometric basis: BKG, urban regions 2002, basedon municipalities as of 31.12.2004, administrative districtsas of 31.12.2004The internationalisationof commercial propertymarkets increases theirvolatilityInternational property investmentshave once again recovered sharplysince 2010 after the collapsecaused by the financial crisis andare responsible for the 43 % ofall direct investment in the globalcommercial property sector.Institutional investors, in particular,are increasingly turning awayfrom their national territories andspread their investment across themarkets of several countries. Themain reasons for the increasedinternationalisation of commercialproperty markets are the increasedfocus on capital markets, theincreased professionalisation of thiseconomic branch, the expansion ofthe investment spectrum and theglobal liberalisation and deregulationefforts at national and local levels.The German transaction market forcommercial property has changedsubstantially in recent years,primarily as a result of increasedinternationalisation. The integrationin global economic processes andinternational investment strategieshas noticeably increased the volatilityof the market. In addition, an everincreasing decoupling of the propertyinvestment performance fromfundamental commercial propertyvalues can be observed.

20 Housing and Property Markets in Germany 2011 | Current key figures for the residential and property markets in GermanyCurrent key figures for the residential and propertymarkets in GermanyIndicator Unit Germany West Germany East GermanyNew housing construction 2010Residential units completed inResidential and non-residential buildingsof which in newly constructed residential buildingsDetached and semi-detached housesMultiple dwellingsof which owner-occupied flats (condominiums)Rooming housesHousing stock 2010Totalin detached and semi-detached housesin multiple dwellingsShare in detached and semi-detached housesResidential rents and property prices 2010Quoted rents (net rent excl. services)Rents in existing buildings (gross rent incl. services)utilities incl. heatingutilities excl. heatingRental burden measured by incomeOffer prices for standard detached homes*Housing vacancy rate 2009Housing vacancy rate in multiple dwellingsOwners 2009Ownership rateFuture residential housing demand per year 2010 to 2025Totalin detached and semi-detached housesin multiple dwellingsTotalin detached and semi-detached housesin multiple dwellingsin unitsin unitsin unitsin unitsin unitsin unitsin million unitsin million unitsin million unitsShare in %in €/sq. m.in € /sq. m.in € /sq. m.in € /sq. m.in %in €Share in %in %in unitsin unitsin unitsUnits /1,000 inhabitantsUnits /1,000 inhabitantsUnits /1,000 inhabitants159 832140 09685 36753 01427 3641 71539.5218.6320.8947.16,207,731,141,6322196 4003.743.2183 000115 00068 0002.31.40.8136 698121 06272 26347 11125 1961 68830.8115.6315.1950.76.54–––23208 0002.945.7154 00098 00055 0002.41.50.923 13419 03413 1045 9032 168278.713.005.7134.45.32–––19136 2005.832.529 00017 00012 0001.91.10.8BBSR-Analysen KOMPAKT 02/2012Note: * 1st half 2010Data sources: BBSR Housing Market Monitoring System; statistics on completed federal and state construction; continuation of federal and state buildingsand housing units; IDN ImmoDaten GmbH; empirica Vacancy Index; German Federal Statistical Office: Income and Consumption Sample (EVS); BBSRHousing Market Forecast 2025 (lower variant)PublisherFederal Office for Research on Building,Urban Affairs and Spatial DevelopmentDeichmanns Aue 31–3753179 BonnAuthor/ContactAlexander Schürtalexander.schuert@bbr.bund.deDistributionforschung.wohnen@bbr.bund.deCatchword: BBSR-Analysen KOMPAKT 2/2012The series BBSR-Analysen KOMPAKT comes outoccasionally and is free of charge.ISSN 2193-5017 (print version)ISBN 978-3-87994-698-3Edited byAdelheid Joswig-ErflingCopy deadline15. September 2011PrintingFederal Office for Building and Regional PlanningNewsletter „BBSR-News-Online“This quarterly newsletter informs you about current researchactivities, publications and events of the BBSR. It is free ofcharge and can be subscribed onwww.bbsr.bund.de/BBSR/EN/Publications