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Are the boomers to blame?: Two effects exacerbate the rent madness in the cities

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The housing market in Germany is tense and there is little in sight of an improvement in the situation. In an interview with the “Frankfurter Allgemeine Sonntagszeitung”, Construction Minister Klara Geywitz believes that the federal government’s declared goal of building 400,000 new homes a year in Germany can no longer be achieved.

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And that’s not all. “Actually, we probably even need 500,000 to 600,000 apartments a year, because the refugees from the Ukraine have arrived,” said the SPD politician.

The persistent inflation and correspondingly high rents are fueling the already overheated housing market. And as if these factors weren’t enough, the real estate analyst Thomas Beyerle identified other multipliers in the Tagesspiegel interview (T+).

Build more against the housing shortage, but is that enough?

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The expert is also of the opinion that the housing supply, especially in major German cities, is “by far” insufficient. In order to at least meet the high rents, he believes that a lot more needs to be built, he reveals in an interview.

“As soon as the cranes turn more, i.e. when there is more supply, prices will stabilize, at least in the medium term,” says the professor of real estate management. But is that also true in the long term? But will more apartments be enough to meet the high demand for apartments? Hardly, believes Beyerle.

He warns that the demand for rental apartments will continue to rise in the future. His thesis: In addition to the younger generation, which currently lives in the cities, there will soon be an age group that has long since settled down in the urban housing market: the baby boomers.

How the baby boomers could affect the housing market

“The baby boomer generation will retire by 2030,” says Beyerle. The children have long since left the house and the garden is suddenly too big. The real estate analyst predicts: “Now the woman says: Thomas! We’re selling the big house! Let’s buy a nice city apartment with a short commute to the doctor and go to the theater!

As a result, according to Beyerle, the baby boomer generation will soon be competing with the big city millennials for two- to three-room apartments in urban areas.

The demand increases. From an economic point of view, it is clear who will be awarded the three-room apartment in the city centre.

Thomas Beyerle, real estate expert

So is there a risk of displacement? The real estate analyst says: “Yes, the danger is there.” Not all baby boomers would sell their houses directly and move to Berlin. In the end, however, demand is increasing: “As many people can’t pull out as will pull in.”

When building a house becomes impossible

“Pulling out” in particular could be difficult for millennials. Because the high inflation and rising interest rates already ensured last year that, according to Beyerle, there were 20 percent fewer “house builders”. The real estate expert speaks here of “threshold households” that can just about afford to own property.

If these 20 percent simply cannot afford a house in the commuter belt, they are more or less forced to remain in the rental market. Beyerle also sees this in the numbers: “Due to the rise in interest rates in mid-2022, the proportion of rental requests on the usual rental platforms has increased significantly.”

The market is therefore likely to continue to tighten: millennials and baby boomers are vying for rented apartments in urban areas.

So what to do in this tense situation? The real estate expert also has a recommendation for this. In the Tagesspiegel interview (T+), Thomas Beyerle reveals specific investment tips and explains why building on the outskirts of Tempelhofer Feld is far from off the table for him. Read the whole interview here.

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Source: Tagesspiegel

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