The Frankfurt rule of thumb has applied
since the house price cycle began: an increase in the housing shortage by
1,000 homes means a rise in residential property prices of EUR 25 per m2. This
admittedly inexact rule implies an increase of EUR 125 per m2 in Frankfurt
residential property prices resulting from an additional shortage of 5,000 homes.
Based on current house prices, this would be an increase of approximately 4%.
However, in light of the extensive shortage, this rule of thumb may well
underestimate actual price developments. This is because, in the current
property cycle, the housing shortage has risen continuously and together with
the length of time spent on searching for a home, potential buyers may have
tended to ultimately accept even elevated list prices.
The property cycle in Frankfurt is likely to be prolonged significantly by low price elasticity resulting
from the construction of an additional 5,000 homes.