BulwienGesa
Andreas Schulten - BulwienGesa
Andreas Schulten - BulwienGesa
Planning permission was granted in January and February for 54,000 residential units in Germany, a rise of 33% on the previous year and probably a new record on a monthly basis, according to the country's Federal Office of Statistics.
This is obviously good news, given the widely-acknowledged shortage of affordable housing especially in Germany's bigger cities. And if the big residential project developers see sufficient incentive to continue to build housing, then the country may be on its way to meeting its ambitious housing targets of at least 350,000 new units annually to come close to meeting demand.
However, Andreas Schulten, the CEO of leading German real estate research group BulwienGesa, is sceptical that the big developers such as Zech Group, Bonava or Formart will continue to see the sense in building for too much longer. The reasons are political regulation, increased construction costs and much-too-high land prices, he says.
Construction costs are so high that only new properties in the higher-price segments are justified, while the number of potential sites in the big cities is very restricted. The issuing of permits takes too long, and the new technical and energy-saving requirements are over-complicated, goes Schulten's reasoning.
BulwienGesa has just published a study of 3,400 real estate project developments in the top German cities of Berlin, Düsseldorf, Frankfurt am Main,hamburg, Cologne, Munich and Stuttgart (the Big 7). These include all current, planned or completed projects between 2013 and 2020, across the asset categories Office Residential, Hotels and Retail.
All the big developers have full order books for residential projects, with more than 17.1m sqm of new residential, a rise of 1.1m sqm since last year. However, this is lower than the average 1.3m to 1.7m sqm annually on the books since 2010. In other words, growth is slowing, at a time when it needs to be rising fast, and is running well below the 300,000 to 400,000 units now required annually. The big cities are increasingly attracting inward migration, whether migrants from more rural areas or recently-arrived refugees.
Germany's Bundesverband Freier Immobilien- und Wohnungsunternehmen (BFW), a lobby group for German housing associations and private property owners, recently surveyed its 1600 members for their views on the market's direction. Over 80% expect prices for new-build and second-hand housing to continue to rise.
The big problem is that the building firms can only build at prices that make their properties unaffordable for too many people. According to BFW president Andreas Ibel, speaking at a housing conference in Berlin last week, "In the lower and mid-price segment it's become almost impossible to build. Rising costs and expenses, not enough building land, unilateral amendments to the tenancy laws in favour of the tenant, and continual fresh regulations for energy-efficient building mean that the authorities will have to come up with something drastic to encourage the necessary investment."
The last round of new energy-saving regulations since the beginning of the year alone have been rsponsible for an increase of 7% in building cost, claim the BFW. And this to save 0.02% on the nation's energy bill, they say. This partly explains the surge in planning permissions granted in January and February, says BFW chief executive Christian Bruch, as they resulted from applications made in 2015 in advance of the new regulations, which were only now being approved.
The BFW and other pressure groups are now lobbying for the reintroduction of tax relief to encourage construction, with subsidies for building in the (numerous) areas in German cities that are experiencing housign shortages. A condition would be that the buildings are priced at €3,000 per sqm or below, or in the 'affordable' category. The government coalition of CDU/CSU and SPD initially showed enthusiasm for the proposals, but are now dragging their feet. Plans to discuss the proposals, initially scheduled for mid-May, have now been put on ice.
