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German Construction Boom Continues

The German construction boom continues to gather pace as the latest figures from the Federal Statistical Office showed last week that the number of newly-constructed homes in Germany rose to levels last seen in 2002.

German construction of residential properties grew by 2.6 per cent to a total of 284,800 units in 2017, marking the sixth consecutive annual increase since 2011.

Despite the latest rise, German construction companies have warned that the number of newly-built homes in Germany is still too low to meet demand in fast-growing German cities, a view shared by tenant associations.

Demand for rental accommodation in major German cities is very high, and many overseas property investors are already building portfolios in Germany to take advantage of the growth.

Although the German coalition government pledged to build 1.5 million apartments, or 375,000 per year, throughout the current legislative period, the Federation of the German Construction Industry (HDB) expects the sector to fall slightly short of the government’s official target in 2018, completing between 330,000 and 340,000 apartments.

Although the number of newly-issued building permits fell by nearly seven per cent in 2017, the number of approved apartments still surpassed the number of completed units by 347,900.

It is thought that a lack of capacity in the German construction sector could be a reason for this, but also some developers in large cities holding back construction to speculate on rising rental costs and real estate prices.

The annual shortfall is leading to pent-up demand in the rental sector and helping to drive residential property prices up.

The German construction sector has been booming for several years and experts have partly attributed the trend to the lasting low-interest rate environment which drives investors towards real estate in search of higher yields.

Overseas property investors have long seen Germany as a safe place to invest, and the continuing German construction boom means that is unlikely to change any time soon.

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