Germany Needs To Build More Properties
A recent study revealed that more than 700.000 flats are missing in Germany right now. No wonder rents and property prices have exploded in the last few years!
- Germany has not been building enough properties for years, and that is why Germany now has a housing crisis!
- Overcrowding has increased enormously. This means that there are fewer people living in a flat than there are rooms available.
- Up to 33% of households are affected and it is getting worse!
- To meet the current demand for housing in the property market, at least 700.000 more homes need to be built.
- The housing stock is over-aged – up to 50% will definitely have to be rebuilt in the next 40 years.
Breaking News: Housing Shortage In Germany
The German Economic Institute, which we love here at GermanReal.Estate because they rely on cold, hard data and the truth instead of myths and assumptions, just published a report saying that the need to build properties here in Germany is as high as it was in the 1990s! Based on that, the chances for Real Estate Investors here in Germany will be tremendous, right? Well, maybe…
In this article on the GermanReal.Estate Blog, let’s see what the German Economic Institute means with the term “housing shortage”, what they propose as a solution, and how you can profit when investing in real estate in Germany.
Germany has had a high demand for living space for many years because we are not constructing enough properties to keep up with our growing population. That is also the reason why rent and property prices have been exploding in the last 10 years. Check out the linked articles for more on these topics.
GermanReal.Estate wants to be part of the solution for affordable housing by offering real estate security tokens to you guys.
Overcrowded Housing Explained
A new report recently came out showing how severe the problem of living space actually is. Eurostat, the home of high-quality statistics (it’s their punch line, not ours), defines overcrowded housing as there being fewer rooms than people living in the flat. If a couple is living in a flat like the one on the right, it’s fine because it’s a two-room apartment. In some other countries, you would count two rooms only if it is two bedrooms, but in Germany, the apartment depicted above counts as a two-room flat.
By the way, that is a two-room flat that GermanReal.Estate was bought in December 2022 for you guys to invest in. Check that out on our GermanReal.Estate Marketplace if you’re interested.
Back to our example! If the couple has a child, Eurostat would call it overcrowded because three people are living in a two-room apartment. The couple with a child in a three-room flat like the one on the right would be fine. If they have two kids, it would be considered overcrowded again. You get the point.
The Real Situation In Germany
How is the overcrowded housing situation in Germany according to a recent study by the German Economic Institute?
Looking at the yellow line, you can see that it is rising. The black line represents under-crowded housing, for example, if a single person would live in a four-room flat. Overcrowded housing was down to a little over 4% in the 2000s and is now well above 6%. Perhaps you think that’s not too bad, but this rise does represent a 50% increase in the last 10 years!
Now think about this: This statistic shows the percentage of households renting in large German cities with more than 100.000 inhabitants. When we are looking at cities only, could it be that the statistic is looking less severe than the problem actually is? Maybe, yes.
Because who’s living in the large German cities? Let’s look at the infographic from Statista on the right.
Mainly single people! In the largest German cities, about 50% of all households are single-person households. And single-person households, by definition, cannot be overcrowded! For this reason, the German Economic Institute factored out single-person households to find out that 1 in 3 households is overcrowded in German cities! Not 6% as seen in the chart, but 33%!
Now you know why we love the German Economic Institute. They don’t just publish the data. They analyze the data to give an accurate evaluation.
How To Solve The German Housing Shortage
All right, so we are working with 33% overcrowded households in large German cities. This is the highest it’s been in the last 30 years! How do we deal with this? Let’s look at one proposal from the German Economic Institute, and then we’ll give a second proposal from our perspective.
Proposal 1: German Economic Institute
If we look at the chart above one more time, we can see that over- and under-crowded housing are both at roughly 6%. Therefore, the German Economic Institute sees some trading potential! And people are doing that. If you check the popular German Real Estate websites or Facebook groups, some households try to get a larger or smaller flat by exchanging it for their current one. So is this the solution if the people in the 6% overcrowded flats switched with those in the 6% under-crowded flats?
Unfortunately, it’s not that easy, because there are many reasons why someone would live in a flat with more rooms than people in the household. Maybe they need a guest room or a home office, or their kids became adults and moved out already. There are many different reasons.
The German Economic Institute acknowledges it too – just trading flats will not solve our housing crisis. What can we do additionally?
Proposal 2: GermanReal.Estate
Our proposal to help solve the German housing crisis and normalize property prices and rents is …(insert drumroll)… to build more properties! Who would have thought!?
In our opinion, Germany is going through the worst housing crisis of the last 30 years because we are not building enough living space. A recent study shows that 700.000 flats are missing in Germany right now. We even think that number’s way too low considering how many properties were constructed in the last 20 years, but let’s take the 700.000 to be conservative.
You can go ahead and bring your real estate bubble arguments, but property prices in Germany have been exploding anyway. And we think it’s because of the insane housing shortage. And it’s only going to get worse!
Why The German Housing Shortage Will Get Worse
In this statistic, you see how old the 42 million flats in Germany are. 13% are older than 100 years, which is usually the average lifespan of a building. So they need to be rebuilt now. They actually should have been rebuilt already.
If you fast forward another 20 years, 24% of properties will need to be rebuilt. 36% over the next 30 years, and 51% over the next 40 years. That means, within the next 40 years, half of the buildings in Germany need to be modernized or demolished and rebuilt. With the current numbers that are being constructed in Germany, that’s not going to work!
That’s why GermanReal.Estate wants to be part of the solution for affordable housing by offering Real Estate Security Tokens to you guys. Because if the real estate industry wants to construct more properties, they need one thing – money! If you want to be part of the solution, hop over to our website GermanReal.Estate and see what properties are currently available for you to invest in.