House and apartment prices in Germany have risen since the beginning of
2009, which means that 2018 is the tenth year in the current real-estate cycle.
Even though the cycle has already reached an impressive length, it is still
characterised by housing shortages and relatively inelastic supply. There is a
shortfall of c. 1 million residential units in Germany as a whole.
Markets in metropolitan areas (A cities) are particularly tight; there, prices have risen
c. 80% between 2009 and 2017. Prices in B/C and D cities have increased
c. 60% and 50%, respectively. The number of newly completed residential units
is finally rising as well. It looks set to reach 305,000 for the first time ever in
2017, up from almost 280,000 in 2016 (the final figure will be released in June
2018). We expect it to increase further to 335,000 in 2018. However, assuming
that at least 350,000 new residential units would be necessary (this is the
government estimate; other research arrives at 400,000 or more), the gap
between supply and demand should continue to widen.