Berlin is not New Zealand. Let’s be thankful for that.
Billionaire startup investor Peter Thiel made headlines when he bought an estate on New Zealand’s South Island as a bolthole in the event of global apocalyptic Armageddon. Luckily for him – and fellow futurologists like Elon Musk and internet guru Kim Dotcom - he got his application for residency and property ownership in in good time.
On August 15th, the New Zealand government passed a bill which will prevent overseas investors from buying existing properties in the country. The measure was introduced to clamp down on foreigners crowding native New Zealanders out from entering their own red-hot property market. Although house prices, particularly around Auckland, have doubled over the past decade, home ownership rates in the bigger cities have been steadily falling among New Zealanders – unable to afford average house prices that are now higher than London’s.
On the other side of the world, here in Berlin, the mayor says he’s considering introducing the same sort of anti-foreigner buying rules as in New Zealand. Mayor Michael Müller told the FAZ newspaper last weekend that the Berlin finance senator is researching suggestions on how to impede speculation in the housing market – and they’re looking carefully at the New Zealand model.
Nearly two-thirds of Berlin apartment sales were made to foreigners in 2015 – a huge rise from the 14% share in 2009, and likely to be every bit as high today. Prices have doubled too in Berlin over the last 10 years, jumping 20.5% in 2017 alone, according to Knight Frank.
Consultants PwC recently put Berlin, with its 3.7 million people, at the top of its list for investment in 2018, and ranked its market second-most active in Europe after London. With Chinese and other Asian investors, along with Brexit-shy Europeans, flooding into the German capital, the issue of affordable housing is becoming a major political hot potato. Berlin, like New Zealand, is run by a centre-left government made up of Social Democrats, Greens, and harder-core Leftists. Affordable housing – and the lack of it for ordinary wage-earners – is a major vote-catcher.
Still, as a matter of practicality, a Berlin ban on foreigners buying property is not going to happen. The government will have to tinker with a variety of other measures first to defuse the housing situation, which is likely to continue to fester for some time yet. The attractions of the German housing market – not just Berlin’s, but that of most major German cities – will continue to attract capital for the foreseeable future.
European capital can’t be stopped, and certainly not while Germany remains the torch-bearer for European solidarity and the great defender of the euro. In any case, it can be extremely difficult to tell what nationality capital actually is, and nobody really knows what the percentage is of property in foreign ownership, or where the owners actually live.
Besides, some of the biggest owners are the German listed residential companies, whose major shareholders are big international hedge funds. The only real option open to the government is to improve anti-speculation measures by playing a more active role as a buyer of buildable land itself, and by looking at ways of boosting the tax take on what it deems to be harmful hoarding or unscrupulous practices. We can certainly expect to be faced with more of this.
The growing unrest about affordable housing casts the spotlight on the speed with which the housing deficit can be made up by swifter issuing of permits, and more practically, the lack of sufficient new building. A new study by the bank KfW Kreditanstalt für Wiederaufbau points the finger of blame for the building bottleneck, not at feet-dragging by local authorities, but at the growing skills deficit in the construction industry. KfW’s chief economist Dr. Jörg Zeuner pointed to the 653,000 issued planning permits that are awaiting the arrival of the JCB’s and cement-pourers for their realisation. The much-vaunted skills deficit is the biggest risk to solving Germany’s housing problem, says the good doctor.
Ah, so it’s not what we thought it was – a shortage of building land, an aversion to higher urban density, or greedy speculators holding back in the hope of higher rents or cheaper sites – but in reality it’s the time-honoured problem of the difficulty of getting - and keeping - good staff.
With Germany’s export-obsessed economy chugging along at practically full capacity, with the order books full and unemployment at record lows, the cry about skills bottlenecks is going up across all corners of industry. Bosses are wringing their hands to get qualified personnel, we hear from all quarters. So much more could be achieved if we had the right people, we hear incessantly. We need to change our immigration laws to attract skilled workers from outside, insist the employers’ associations.
Well yes, m’lud, up to a point. Germany’s leading industry association the DIHK warns that 1.6 million jobs are currently unfilled due to a lack of qualified personnel. But labour unions and other economic realists are increasingly expressing skepticism about the employers’ moaning, and suspect the whole thing is a fraud. There’s been a skills shortage for years, they say, and yet look how well certain sectors of the economy are doing.
The real problem, they say, is that employers’ primary need is to keep the wages of the lower-paid low, and then hire more of them at the lowest wages, rather than paying them closer to what their ‘Meister’ earns. This has sparked the current debate in Germany about changing the status of asylum-seekers to make them more acceptable to employers as job applicants (known as a “Spurwechsel”) in the event their asylum applications prove weak.
There is a strong argument that a good chunk of the so-called skills deficit is overwhelmingly to be found in the lower-paid sector of the economy, such as temping, security, gastronomy and transport, where job fluctuation and hence vacancies are at their highest. Doubtless there are pockets in certain industries where a shortage of qualified personnel does exist. But we don’t buy the notion that Germany’s housing problem is down to the lack of key personnel across the board holding up progress.
Companies always have a measure of redress when faced with a skills shortage. They can pay more, for a start. There are plenty of skilled Europeans who could come to bail out German industry if the economic situation becomes life-threatening. And maybe they yet will. But so far we haven’t seen any real increase in wages and salary levels indicating that this is happening. The housing problem has other causes, and they need to be addressed.