BRIEFING: Affordable housing is Germany’s next ‘boom’ sector

The German residential sector continues to offer opportunities for investors, especially in less obvious areas like student housing, microhousing and affordable housing, experts agreed at PropertyEU’s Germany Investment Briefing, which was held in London on Tuesday.

‘A lot of foreign capital is looking at German resi and the reason is that the attractiveness is really high,’ said Rainer Nonnengässer, CEO of Münchmeyer Petersen Capital. ‘There isn’t a London or a Paris in Germany, but many different cities that are all attracting workers and students.’ For example, there are 2.7 million students in the country and the universities do not offer any help with accommodation, so demand is ever higher while the offer side has not improved.

The massive influx of migrants from outside Europe will also change the dynamics of the market. ‘The refugee crisis will have a huge impact on the residential sector in Germany,’ said Nonnengässer. ‘Refugees are not a problem, as there are 800,000 people and there are 1.6 million vacant flats,’ said Thomas Beyerle, managing director and group head of research at Catella. ‘But there is a growing demand from different sectors of the population for affordable housing and only development can meet this demand.’

Beyerle’s prediction is that ‘in the next five years affordable housing will be the real boom sector,’ with development in and around city centres wherever land can be found. ‘I would particularly bet on Berlin because it is a real hot spot at the moment,’ he said. ‘Office buildings will continue to be converted into resi, but instead of becoming luxury flats they will be converted into affordable housing.’

The German government is keen to stimulate this market, Beyerle said: ‘We expect government support and I am optimistic that a framework will be created to facilitate development. The money is there and the willingness is there.’

On the crucial question of financing for development, ‘German banks, including state-subsidised platforms, love financing these kinds of products,’ said Nonnengässer. ‘But the problem is that it is more difficult to attract investors on the equity side.’

According to Beyerle, though, it is only a matter of time: ‘Lack of supply is such that there has to be development. I expect to see more cranes than ever in Germany.’