Real Estate

A Stable Investment

  • Why it matters

    Why it matters

    Germany has the most valuable real estate market in Europe, but a relatively low rate of property ownership.

  • Facts


    • The real estate industry accounts for 18 percent of German economic output and is bigger than the auto industry.
    • Real estate assets in Germany are worth a total of €11.2 trillion ($12.5 trillion).
    • About 37 percent or 15 million apartments are rented out by private, small-scale landlords.
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More little white houses. Source: Oliver Berg/DPA.

Germany is known as an export country. But surprisingly, its biggest industry isn’t the retail or automobile sector – it’s real estate.

With a gross value of more than €500 billion ($560 billion), the real estate industry is responsible for an impressive 18 percent of Germany’s economic output. Despite this it’s a small playing field, even with construction and mortgage banks factored in.

“We have three million people working in 817,000 companies. That’s evidence of a surprisingly small-scale structure,” said Michael Voigtländer, head of the real estate competence center at the Cologne Institute for Economic Research (IW).

According to a new study penned by Mr. Voigtländer and Tobias Just, a professor at the University of Regensburg, real estate assets in Germany are worth a total of €11.2 trillion ($12.5 trillion), including the value of developed land. This total is larger than anywhere else in Europe, but diminished by the fact that property ownership numbers are actually relatively low.

That makes Germany’s real estate market a well-hidden economic anchor for all of Europe. The multifaceted ownership structure in the housing market and high financial security requirements for mortgages make the industry quite stable. Germany has also has several strong cities with attractive commercial real estate markets right now.

Even though the industry is prospering, development is highly variable in Germany.

German housing bubble has been speculated about for some time. But Mr. Voigtländer said his research shows that the clear rise in prices over recent years is accounted for, and a bubble is unlikely. Given the strong economy, high immigration and low interest rates, prices should continue remain stable and if they do rise, it will not be at a wildfire rate.

“The IW Cologne figures confirm that we do not currently have a real estate bubble, neither as a result of excessive loan financing, nor due to a glut of new construction,” said Jacopo Mingazzini, CEO of Accentro Real Estate AG. “If interest rates are raised, we can expect lateral movement at best.”

Even though the industry is prospering, development is highly variable in Germany. The gap between trendy districts and problem neighborhoods is growing.

“Dynamic and high-priced markets with considerable demand for new construction are offset by shrinking regions with declining prices, vacancies and properties in need of demolition,” said vice president of the German Association for Housing, Town Planning and Regional Planning, Rolf Buch.

Mr. Voigtländer and his co-author of the study are calling for more active policy, arguing that construction costs and incidental costs should be reduced, and allocation of land and planning rights simplified so that the ownership landscape can become more diversified in a stable way.

According to Kai Warnecke, president of the central association for German home owners, some political decisions at the expense of landlords are especially questionable. According to the study about 37 percent or 15 million apartments are rented out by private, small-scale landlords. “The vast majority of landlords are not getting rich,” said Mr. Warnecke. The number of private renters rose by 330,000 between 2011 and 2015.

“For much too long, lawmakers have acted on the basis of a faulty understanding of the housing sector,” said Frank Wojtalewicz, managing director of the real estate agency d.i.i. Deutsche Invest Immobilien. “They continue to believe that the housing economy is dominated by large corporations.”

In Germany, tenant rights are far-reaching and the law often favors the side of those paying the rent. Mr. Wojtalewicz said lawmakers would do well to refocus policy.


Silke Kersting reports for Handelsblatt on consumer protection, construction, environmental policy and climate change. Reiner Reichel has been working for Handelsblatt since 1995 and specialises on real estate, closed-end fund and system models. To contact the authors:

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