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

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