Press release No. N 012 of 4 December 2019

• Cities are growing disproportionately as mainly young people move in
• Less living floor space per person in the metropolises
• Construction backlog: number of dwellings with building permits but not completed in 2018 more than twice as high as ten years before
• Housing construction is engine of growth in construction sector; marked price rise in construction and maintenance of residential buildings

WIESBADEN – Population growth especially in the cities has increased the pressure in the German housing market in the last few years. In 2018, there were 2.5 million more people in Germany than in 2012 (+3.1%). Particularly high growth rates were recorded for the cities, especially for Leipzig (+12.9%), Frankfurt on the Main (+9.5%) and Berlin (+8%). The population growth in cities with 100,000 or more inhabitants is mainly due to immigration, in addition to the excess of births over deaths. This is a major result of the press conference on “Booming cities and construction backlog: developments in the German housing market, 2008 – 2018” held by the statistical offices of the Federation and the Länder in Berlin on 4 December 2019.

Young people move into towns, older people move out
“Young people aged 20 to 40 are attracted by metropolises. Between 2013 and 2018, the net number of people who moved to cities not attached to an administrative district was 1.2 million. The development differs for people aged 40 or over. A net number of 120,000 people of this age group moved out of cities”, said Dr. Georg Thiel, President of the Federal Statistical Office, at the press conference. “On the whole, the demand for housing has markedly increased, especially in the cities”, Thiel also said.

Less space in cities
Due to the lack of housing space, people move closer together in the seven largest cities of Germany, that is, Berlin, Hamburg, Munich, Cologne, Frankfurt on the Main, Stuttgart and Düsseldorf. Between 2010 and 2018, the average living floor space per person in those cities decreased by 1.7 square metres to 39.2 square metres, according to microcensus results. More and more often, the decreasing residential space available is shared. In 2010, more than one in two dwellings (51%) in these metropolises were occupied by one person, while eight years later this was the case for only 45% of the dwellings. In that period, the proportion of dwellings occupied by two people rose from 30% to 32%, and that of dwellings occupied by three or more people from 19% to 22%.

As a possible consequence of this development, dwellings in multi-family houses with ten or more dwellings gained in importance in the seven largest cities. Their proportion in new owner-occupied dwellings from 2011 rose by 15 percentage points to 39%, while in rented dwellings it increased to 72% (+14 percentage points).

This shortage of housing space is a phenomenon that is specific to cities. The average living floor space per person in Germany remained constant at just over 45 square metres between 2010 and 2018.

Rising demand leads to construction backlog
Real estate companies, politicians and construction authorities try to meet the growing demand for housing. This is shown by the number of building permits granted every year. It has nearly doubled from roughly 178,000 in 2009 to almost 347,000 in 2018. In 2015, it peaked at over 375,000 building permits granted. Since then, the number has fallen slightly.
However, a more important reason for the current lack of housing is the volume of unfinished building projects, that is, the number of dwellings with building permits that are waiting to be completed. Between 2008 and 2018, the number of unfinished building projects all over Germany has more than doubled from roughly 320,000 to 693,000 dwellings with building permits not yet completed.
These trends regarding unfinished building projects are also reflected by the development of unfilled orders of local units in the main construction industry. Unfilled orders are orders received but not yet completed. Unfilled orders in housing construction rose continuously since 2015 and in 2018 it reached its highest level since 1997. Currently, orders to the value of roughly 9.1 billion euros are waiting to be completed.

Staff problem
Construction companies do not have sufficient staff to complete their construction orders without delay. The number of persons employed in housing construction rose by just 25% from 2008 to 2018, while unfilled orders nearly tripled over the same period. At the end of 2018, 467,000 people were employed in local units of the main construction industry (local units with 20 or more persons employed). That was markedly less than in the late 1990s, when the number of persons employed peaked at over 700,000.

Housing construction is engine of growth in construction sector; marked price rise in construction and maintenance of residential buildings
Housing construction has been the engine and pillar of growth in the construction sector. The turnover (not adjusted for price changes) of construction units with 20 or more persons employed more than doubled from 8.6 billion euros in 2008 to 20.3 billion euros in 2018.

In the same period, the construction operation prices of construction companies regarding new residential buildings were up by 24.3%. The prices of carcass work regarding residential buildings rose by 22.8%, which was a more moderate increase than that of installation and completion works (+25.7%). As regards installation and completion, the price rises were particularly sharp for sanitary facilities (+36.6%), heating systems (+33.6%) and electrical systems in residential buildings (+34.4%).

From the household perspective, the highest price increases in the entire field of housing expenditure were recorded for dwelling maintenance and repair. In 2018, they paid roughly 26% more than in 2008 for products and services regarding the maintenance and repair of dwellings or residential buildings. For comparison: the overall consumer price index increased only by just under 13% from 2008 to 2018.