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The German real estate market is lively

The demand for new homes is growing, thanks to low interest rates and immigration. The renovation industry, on the other hand, is stagnating.

by Andrea Cusi

In 2015, the German construction industry continued to grow dynamically, although somewhat slower than in previous years. Indeed, after the very positive results for 2014 (+3% over 2013), investment in construction has grown by 1%, making up for 10% of GDP.
In the residential sector, demand for new homes has been spurred by low interest rates and the search for more secure investments, as well as positive employment figures, and has grown by +4.5% over 2014. To these factors we must add the poor availability of housing in many of Germany’s growing regions, due to the upturn in immigration – most recently boosted by a tide of refugees. Migratory flows and interest rates will remain the key factors for the foreseeable future, with the residential sector predicted to grow significantly in 2016 (+3%), after which it will come into line with the overall slowdown of the German economy.
The renovations industry, on the other hand, is stagnating at 63% of total production, although this is still a significantly higher volume than that for new homes. Thanks to its large number of older buildings, renovations are costly in Germany, but the potential for growth is low. In recent years, many homes have undergone energy upgrades, promoted by subsidies and the increasing cost of energy, and a period of natural stagnation is now predicted, especially with the value of crude falling and the expanding market for new homes market underlining the market for old buildings. The forecast for the next three years, after a marginal increase of +0.1% in 2015, are that the renovation market is likely to stagnate, with growth stable at 0% or so.

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The German market, which alone represents 19% of the construction industry in Europe (making it the first country in the EU), is forecast to remain stable, with a tendency for growth to slow down and, as regards investment in construction, a predicted +0.9% in 2016 will continue to diminish to 0%, with a mean annual rate of +0.3% in the period 2015 to 2020.