New study with focus on construction gap in Germany’s larger cities

A new study by the Switzerland-based Empira Group finds no conclusive evidence of a general undersupply of housing in Germany, although it does confirm an increasing housing shortage in the country’s Top 7 markets.

This all sounds obvious, might be a first reaction to such a study. Nonetheless, REFIRE found the study useful, as the study traces changes in various factors over a period of 10 years that have contributed to housing shortages and the resulting investment potential for property developers.

For example, the ratio of apartments per 100 inhabitants has fallen in nearly all big cities, due to the strong population influx and undersupply of new construction – except in Hamburg. This strikes us instinctively as probably correct, with the gap widening noticeably in Germany’s other big cities, as we report here frequently in these pages.

Empira Group’s latest study focuses on residential construction in Germany’s biggest cities. According to the study’s author Dr. Steffen Metzner, "The Top 7 markets are particularly interesting for investors and developers for a variety of reasons; the residential segment in particular is being focused on - not only politically. But a closer look reveals clear differences between these seven locations in terms of the dynamics of supply and demand, and ultimately in the attractiveness for residential developers."

Of the Top 7 cities, Berlin recorded the sharpest decline in vacancies since 2006 and Munich currently has the lowest remaining residential space reserve of only 0.2%. The study also develops differentiated key figures for supply, demand and shortage, so that drilling down, the ratio "increase in housing stock per increase in population" shows considerable differences between the cities. Berlin increased its stock by only 11 apartments per 100 new inhabitants, while Munich built 52 apartments - one housing unit per two-person household. In terms of surface area, Düsseldorf and Stuttgart built approx. 20 sqm per newly-added household, while the added residential surface in Cologne is over 33 sqm.

The study concludes in a ranking of the Top 7 locations for project developers based on a differentiated analysis of demand indicators, existing stock and construction activity. According to the calculated key figures, Frankfurt, Stuttgart and Munich offer the best environment for new residential construction, while in Hamburg and Cologne the housing-shortage indicators are less immediately appealing.