German building land prices surge to new record high
New figures released at the end of August by Germany's Federal Statistics Office (Destatis) show that the average cost of a square metre of empty building land reached a record high last year.
The average price of a square metre of land in Germany is now €199 - up from €190 in 2019, and up a whopping 53% on its price in 2010 of €130. (For those looking even further back, the price in 1962 was €7.58...)
There are of course wide regional differences, ranging from under €50 in some regions to €350 in others. The most expensive regions are Bavaria and Baden-Württemberg where a square metre of land cost €349 and €245 respectively. The cheapest areas are the eastern states of Thuringia, Saxony-Anhalt and Mecklenburg-Vorpommern, with prices ranging from €46 to €63 per square metre.
Destatis explains that, in principle, the average purchase value increases with the size of the municipality. In municipalities with fewer than 2,000 inhabitants, a square metre costs an average of 71 euros, whereas in the 14 largest German cities - those with at least 500,000 inhabitants - the average price is €1.213 euros, fully 17 times as much.
The price is being driven by low interest rates and the ongoing demand for living space, particularly in the cities. The spillover effect is the cost of both renting and buying in Germany, abetted by the surge in construction costs and the shortage of building materials.
Destatis said that three-quarters (76%) of all sales of building land were sites in residentially-zoned areas, at an average price of €234, whereas in commercially-designated areas the average price was €242 (this would refer to areas where there is no gaps between buildings, such as in terraced houses) where a further premium of €92 was payable, bringing the price to €309.
The issue of land hoarding has been coming increasingly into focus by interest groups and political parties in the last few years. The Green Party have produced figures claiming that building permits for about 600,000 residential units have not been acted upon, keeping building land artificially high. Local authorities are also notoriously under-manned, leading to delays in planning permission in Berlin, for example, of up to ten years, according to Axel Gedaschko, president of housing association GDW.
Leading tenants representative association Deutscher Mieterbund (DMB) blames the ensuing rise in the price of building land for adding a further 9% to the share of household income attributable to rent, with the average Berlin family now committing 40% of their net disposable income to servicing their (cold) rent.
Organisations such as the DMB are trying to leverage their political clout to enforce measures such as forcing owners to build within a specified time period or forfeit the land to the local council. There has already been new legislation introduced this year to clamp down on share deals, whereby companies - but not individuals - can avoid paying the Grunderwerbsteuer (land transfer tax), which can be as high as 6.5% of the purchase price.
Other measures, such as higher density building and conversion of commercial properties into residential to provide more social and affordable housing, are very much to the fore of discussions.
The recent Baulandmobilisierungsgesetz also contains a number of measures to give more control over building land back to local authorities. This includes designating more redevelopment areas in which they can exercise pre-emption rights, along with mobilising more land potential - for example, exploiting brownfield sites.