800,000 approved units - the real bottleneck of the housing crisis

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It cannot be said that little is being built.

Around 300,000 new apartments are likely to have been completed in 2020, and 310,000 are expected in 2021.

The number of building permits in Corona year 2020 even increased by 2.2 percent to 368,400 apartments, according to the spring report of the Central Real Estate Committee (ZIA) presented on Tuesday.

But despite approved construction projects, the completion of more and more apartments is a long time coming.

In 2020, the so-called construction overhang rose to almost 790,000 units.

A new sad record

This is a new, sad record - which exposes the complaints of many victims who attribute the housing shortage in German metropolitan areas solely to the inertia of the administration, not being quick enough with the provision of land and the issuing of building permits.

"Capacity limits in the construction work are one possible explanation for this," says the ZIA very briefly.

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If almost 800,000 apartments cannot be built just because investors wait or the construction industry fails, this creates turbulence in the real estate market.

"Persistent capacity restrictions in the construction industry, long planning and approval procedures and a lack of building land in metropolitan areas would make real estate projects just as expensive as higher energy efficiency requirements, complex regulations for new buildings or measures such as rent controls," said Lars P. Feld, Professor of Economic Policy at the University of Freiburg, who analyzed the overall economic development for the ZIA spring report.

The situation on the German real estate market is heterogeneous.

"In the living area, a trend reversal in price development is hardly in sight," says Feld.

The financing conditions are still attractive, the loss of earnings in the Corona crisis is only of a temporary nature.

"Enable more housing construction"

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In some cases, households could even have made high savings due to the Corona.

"In terms of building policy, you shouldn't react dogmatically, but with foresight more housing should be made possible."

For the first time since 2002, approval activity for private homes has developed more positively than in apartment building, according to the ZIA: while approvals for new homes increased by 5.9 percent to 118,800 last year, the increase for apartment buildings was only 0.4 percent.

The increasing number of homes has to do with moving to the countryside.

And the corona pandemic has strengthened the trend towards living in rural areas.

"But since 2017 there has been a positive migration balance for the really rural regions with one to one and a half hours drive to the center," says Harald Simons, CEO of empirica AG.

For the spring report he examined the housing markets in rural areas.

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Above all, people over the age of about 30 years as well as young people and children under 18 years of age have increasingly moved to regions further away from metropolises.

"The living requirements change, apartment features such as balcony, garden, study or generally more space are increasingly moving into the field of vision of those interested," says Simons.

Numerous advantages of living in the city have ceased to exist - at least temporarily - while the disadvantage of the high housing costs remains there.

Digitization also increases the attractiveness of life in the country.

Working, shopping - you no longer have to go to town to do that.

"An online retailer doesn't care whether he delivers to Kreuzberg or the Uckermark," says Simons.

But that is not yet a real wave.

More like a plant.

There are between 100 and 200 families per year and district who would move from the city.

However, it is clearly evident that purchase prices in rural areas are changing.

In the years 2016 to 2020, the increase in purchase prices for single and two-family houses in large cities and in the surrounding area “adjusted upwards”, according to the ZIA report.

The purchase prices in 2020 averaged 402,000 euros.

The attractiveness of remote areas has increased relative to the more central locations.

Simons appealed to politicians to “support the trend benevolently”.

For rural areas it offers an opportunity for economic, social, cultural and demographic stabilization.

"It's going to the village, that shouldn't be put under general suspicion."

Crisis loser in non-food retail

The ZIA report sees the housing market as the winner of the corona crisis. According to ZIA President Andreas Mattner, the overall balance sheet for real estate is ambivalent. “The non-food trade is the clear loser in the crisis. Two thirds of the dealers are currently still receiving no help, the rest is still too little. A complete opening perspective must therefore finally be shown, only this can still prevent bankruptcies, ”said Mattner.

The trend towards online trading was additionally fueled by Corona. "This is also having an impact on the real estate industry: The logistics properties can look back on a record year and are the clear winner of the crisis," said Mattner. "I would like to encourage the finance minister to implement his idea of ​​relieving the digital corporations, which do not pay any tax in Germany, a little bit around the corona profits."