Our figure of the month 02/2017: Mountains and valleys in housing construction
Share of newly erected dwellings in detached houses falls to 39%
In times of low interest rates, the construction or purchase of housing appears financially very attractive. Real estate investment projects offer a high return on investment for both private and public investors. This applies especially for cities where housing has become increasingly scarce. Our figure of the month illustrates "mountains and valleys" in the segment of new construction of housing in Germany over the last 20 years. Since 1997, the number of newly built flats has been divided in less than half. While more than 0.5 million apartments were completed in the year 1995, this figure has been reduced to merely 217.000 in 2015. The year 1997 can be regarded as a mountain peak. From then onwards, the number of newly built flats decreased almost continuously until 2009, when the number of new flats hit the bottom of the valley. The bursting of the "New Economy Bubble" largely contributed to the reduction in-house building. With an alternating development, the period from 2002 to 2006 forms, a first valley where the construction activity seemed to settle down around 250.000 to 200.000 newly built flats per year. From 2007 to 2009, the construction industry in Germany slipped further. In 2009, the year of the worldwide economic and financial market crisis, the construction activity reached its lowest value within a 20-year period with merely 137.000 new apartments built in that year. Since then, the figure has continuously risen again.
Source: Federal Statistical Office
The development of the number of new flats that were built between 1997 and 2004 in single-family houses follows a counter-rotating path: In 1997, less than 30% of the total number of newly built flats were part of detached houses (dh). In the following decade, a steep rise of this share could be examined. The peak was reached in 2004 with a share of newly constructed flats in detached houses of around 58%. From the onwards, this trend turned to the opposite direction. After a relatively flat descent with slight sideways movements up to the year 2011, the share of new flats to be found in detached houses has been continuously decreasing. However, it did by far not hit the low figure of 1997. In 2015, the share of new dwellings in single-family homes amounted to 39%. It has to be stated that during the past years, not only the construction of larger housing with a number of flats in Germany has risen due to low interest rates, but the building activity of single-family homes has increased, as well. So what is the reason for the reduced share of flats in detached houses? It is the dynamically increasing number of apartments in multi-family houses due to an increasingly tight housing supply in larger cities and an especially severe backdrop of low-cost dwellings. This intensive building activity leads to the completion of a large number apartments in multi-family houses and an overcrowding of urban areas. At the same time, the share of single-family houses has been reduced. Professional real estate investors reinforce this trend.
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