Le mie ricette per la real estate communityResidential construction and real estate investments in Germany need to be considered on a much more regionalized level than it has been the case so far, as confirmed by a recent study conducted by the technology and real estate company PREA. The study utilized birth rates, mortality rates, net migration balance, and economic development to forecast the population and average age for all districts and independent cities in Germany over the next ten, fifteen, and twenty years. This information allows for the estimation of housing demand and regional vacancy risks. Real estate investors regularly underestimate this aspect, which is why PREA analysts explicitly warn about the consequences of the birth collapse.
Overall, it is evident that demographic change will have a particularly significant impact on rural regions in Germany over the next twenty years, where population declines up to 60% (Saale-Holzland-Kreis) are projected. The predominantly rural states of Saxony (-9.5%), Saxony-Anhalt (-17.2%), and Thuringia (-14.9%) will be particularly affected. In contrast, urban centers will continue to grow, primarily due to increased migration. Notably, the metropolitan regions around Munich, Nuremberg, Berlin, Hamburg, and Frankfurt am Main stand out in this regard. The urbanization trend, which has been ongoing since the mid-2000s, will remain active, exerting sustained pressure on major cities. Nevertheless, the average age will rise from the current 44.4 to over 46.5 years, which is likely to strengthen the demand for barrier-free housing and public spaces.
Many cities will experience double-digit shrinkage
Cities with significant and sustainable growth, as well as relatively young populations, contrast with those experiencing significant population declines. As a result, a ranking of investment locations for the next 20 years emerges, with Regensburg, Leipzig, and Potsdam leading in terms of population growth, while Neuss, Trier, and Moers have been identified as locations with the largest population and housing demand declines.
On the other hand, the metropolitan regions around Munich, Nuremberg, Berlin, Hamburg, and Frankfurt am Main, as well as the major cities in eastern Germany, will continue to grow. Leipzig stands out in particular, with PREA forecasting a population increase of +30.2% over the next twenty years. A significant factor contributing to this visible urbanization trend is likely the growing importance of knowledge-intensive services in the value chain.
A declining population trend will lead to increased vacancy rates in the affected regions, write the authors led by Dr Martin Kern, Senior Capital Market Quant at PREA. However, even with a stagnant population, the real estate stock needs to be adapted to changing needs. This also applies to urban infrastructure. From an urban planning perspective, this could mean that neighborhoods need to be downsized or even entire settlements may need to be abandoned in the affected regions.
“The goal of the study is to provide investors with a clear understanding of which locations are suitable for real estate investments based on certain criteria and which may experience increased vacancy rates due to the decline in births and the associated population shrinkage,” said Gabriel Khodzitski, CEO and founder of PREA. Currently, the situation is still relatively relaxed. Germany has a population of 84 million, the highest ever recorded. However, due to the persistently negative birth rate for over 50 years and the overall higher life expectancy, the proportion of older people is initially increasing, followed by an increase in the mortality rate. The aging society thus leads to a decline in productivity and housing demand – a trend that manifests itself regionally in Germany in varying degrees.
Suburban municipalities must prepare themselves for demographic change
Winners of demographic change will be urban growth regions that adapt to the needs of an aging society at an early stage. According to PREA, however, these do not necessarily have to be exclusively large cities. “Given the ongoing high demand pressure on economic centers due to demographic change, the cost of housing, both for rent and purchase, will continue to rise,” said Dr Martin Kern. “This could make the surrounding areas of cities more attractive. This presents an opportunity for rural regions to counter population decline if they can present themselves as age-appropriate suburban communities.”
It is certain that demographic change increases the demand for accessibility and, therefore, the demand for barrier-free facilities. By 2035, the shortfall in barrier-free facilities, such as step-free access, sufficient freedom of movement, and level-access showers, is expected to grow to around 2.0 million housing units.
Accessibility is not only in demand within homes but also in public spaces. According to Kern, this includes the expansion of public transportation, adjustments to sidewalks and traffic lights to facilitate easier mobility, barrier-free access to public facilities, and the development of neighborhoods that offer a wide mix of residential, working, and local amenities. In addition, older people have specific requirements for social and medical infrastructure: of the five million people in need of care in Germany, only 16% are in institutional care. 84% are cared for at home, and 75% of them are cared for by family members.
One possibility for urban planners to address these challenges is to strengthen the surrounding areas of major cities. “Infrastructure measures that connect the periphery more closely to economic centers can spread the demand pressure over a larger area, allowing potential outlying regions to be incorporated into the growth region.” The same applies to housing construction. “Property owners and investors currently have the opportunity to minimize vacancy risks and achieve an attractive additional return with barrier-free apartments, regardless of whether they arise from renovation measures or new construction. Because accessibility benefits not only people with mobility limitations but everyone.”
Pictured : Martin Kern and Gabriel Khodzitski
Source : PREA