Deutsche Bank forecasts a pivotal change in Germany's housing market, predicting that demolitions of single-family homes will surpass new constructions. Annual new builds have fallen from 250,000 in the 1970s to below 110,000 recently, with only 15,500 permits issued in early 2024. High interest rates, construction costs, and land scarcity, combined with ecological concerns, drive this trend. Single-family homes, with higher energy consumption and CO2 emissions compared to multi-family units, face growing challenges. As construction slows, demand for existing single-family homes is expected to increase, potentially raising prices and reshaping the market.
Recent forecasts from Deutsche Bank highlight a significant shift in Germany's housing market, where the number of single-family homes being demolished is expected to surpass new constructions. This shift is poised to influence real estate prices and rental trends across the country.
For years, Germany has seen a steady decline in the construction of single-family homes. Deutsche Bank's recent research underscores that this trend is set to continue, driven by high interest rates, soaring construction costs, and a scarcity of available plots. Additionally, ecological concerns are pushing developers toward more sustainable building practices.
In the 1970s, Germany saw the construction of approximately 250,000 single-family homes annually. By the time of reunification in 1990, this number had already dipped below 150,000. Although reunification caused a temporary spike, recent figures reveal a decline, with the number of new single-family homes not surpassing 110,000 in recent years. In the first five months of 2024 alone, only 15,500 permits for single-family homes were issued, a stark contrast to Germany's total housing stock of 16.3 million units, which is barely growing due to sluggish investor activity.
The challenges facing single-family home construction are multifaceted. Urban areas, where most people want to live, have seen a surge in land prices and complex regulations, making single-family developments less feasible. As a result, smaller apartments in multi-family buildings, which make better use of limited urban space, are becoming more popular.
Ecological factors are also driving this change. Single-family homes typically have a larger environmental footprint compared to multi-family residences. Deutsche Bank's climate model indicates that single-family homes consume about 25,000 kilowatt-hours of energy annually and emit around five tonnes of CO2, significantly higher than the 10,000 kilowatt-hours and two tonnes of CO2 produced by multi-family units.
Looking ahead, Deutsche Bank forecasts that the annual construction of new single-family homes could fall to between 20,000 and 40,000. If this trend persists, the number of demolitions could soon exceed new constructions, impacting the housing market.
Despite the decline in new single-family homes, demand remains strong. This imbalance is expected to drive up prices for existing single-family homes at a faster rate compared to multi-family flats. This trend could reshape Germany's real estate market, making single-family homes more scarce and potentially more valuable.
By focusing on sustainable and space-efficient housing, Germany is adapting to current economic and environmental challenges, setting a new direction for its residential construction sector.
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