Germany’s real estate sector will be the ‘anchor of stability’ for Europe

Germany’s real estate sector will be the ‘anchor of stability’ for Europe, according to a new study published this month.

The study, 'Wirtschaftsfaktor Immobilien 2017‘ was carried out by the Gesellschaft für immobilienwirtschaftliche Forschung (GIF), the BID, Haus & Grund and the DV. The authors of the report were Prof. Dr. Michael Voigtländer from the Cologne Institute for Economic Research (IW Köln) und Prof. Dr.Tobias Just from the University of Regensburg.

Germany’s property market, which is valued at around €11.2b, is not just a stabilizing factor for the economy but, because of the way it is structured, it serves as an anchor for the whole of Europe, according to the study. In addition, it also shows the increasing convergence between important European markets and the low volatility regarding mortgage lenders in Germany.

However, Germans aren’t the richest when it comes to property wealth, according to Just: ‘Only Austria and Sweden have a greater net property wealth per head than Germany, at around €100,000,’ he said.

Germany’s strong labour force is also boosting the market, according to Voigtländer. ‘Three million people work – and this is surprisingly detailed - in 817,000 firms. That’s more of a safeguard than at any point in recent decades.’

Germany’s property market is stable in no small part due to small increases in both prices and rents in big cities in recent years, according to the study. In addition, the complex ownership structure, coupled with the fact that Germany has many large cities and isn’t centralized like the UK, along with the low-interest rate environment and a security-orientated finance culture means that the country serves as a blueprint for potential economic development elsewhere in Europe.

Of the €500b Bruttowertschöpfung (gross value added) in Germany, property accounts for 18.2%, according to the study. ‘Subsequently, our business is much larger than the automobile or retail sectors. Property is a stable anchor of the overall economy,’ said Voigtländer.

As a result, there is no imminent danger of a property bubble, neither due to excessive loan financing nor to an excessive development pipeline. Nonetheless, at least for now, Germany is expected to remain a nation of renters (around half the population own their own home, according to Statista). ‘Good economic data is not enough to change that,’ said Christoph Gröner, CEO of German developer CG Gruppe. ‘It’s also necessary to heavily invest in research and development in the property sector to come up with a sophisticated Supply Chain Management. Despite the significant economic meaning for the industry, innovation remains a foreign word,’ he added.