Housing construction in Germany likely to lag behind demand in 2016

In the past five years, there has been a significant increase in the number of skilled workers migrating to Germany, particularly from within the EU. In 2015, the number of asylum-seeking refugees surpassed the migrants from inside the EU. Overall, Germany had around one million migrants last year. Since 2007, number of students entering Germany grew over 700,000, resulting in a rise in housing demand in university cities.

Order numbers in construction industry surged. In the last quarter of 2015, orders grew 22.8% y/y. The number of construction for the rental sector is expected to similarly rise in 2016, noted KfW Research. But owner occupier sector’s construction is also likely to witness huge investment. Additional declines in construction interest rates and the likelihood that employment and income figures will keep increasing will underpin the growth in construction investment, added KfW Research.

According to estimates, between 350,000 and 400,000 new housing units will be needed in coming years. In 2016, around 300,000 housing units will be completed, but housing construction is likely to be short of demand in the year, according to KfW Research. Nevertheless, adequate housing units are expected to have been completed in 2017 in order to meet demand.

“Construction interest rates are expected to remain favourable and are unlikely to exceed 2 or 3% in 2016. Construction industry estimates suggest that capacity problems are unlikely to hinder the expansion of construction levels”, said KfW Research.