A Lack of Sellers on the Housing Market

Posted on by Dr. Rainer Zitelmann

Germany’s housing market is more attractive today than it has ever been. The asking rents for new lettings are rising quickly (by 13.5% in Berlin) while vacancies are in rapid decline. All of this was rather predictable, because there has been virtually no housing construction in years. Notwithstanding these glad tidings from the residential rental market, the residential transaction market has seen very little turnover yet – less than four billion Euros – and the reason for this is perfectly obvious: Who would want to get rid of their residential property at a time like this? Since there is an extremely high number of prospective buyers but few sellers, prices are soaring – by 10% in Munich, and by 6% in Berlin (see items above). Private investors are quite content with their homeownership – so why would they want to sell? 
For most, the question remains what to do with the sales proceeds. Most private and institutional investors steered clear of the stock market – obviously a bad mistake. Bonds have also become less than lucrative because the time of sinking returns and prices rising in sync is over. And the interest paid in current accounts is so ridiculously low that no one in their right mind would trade their residential property for assets that yield 2% or 3%.