KfW Research expects 300,000 new homes to be completed in 2016

Frankfurt am Main (ots) -

- Sharp rise of 3% in residential construction investment
- New construction still failing to keep up with demand, however
- Heightened risk of localised property bubbles

The number of new homes being built in Germany continues to rise
but will still fail to keep up with demand this year. KfW Research
expects investment in residential construction to rise by 3% in real
terms in 2016 (up from 1.3% in the previous year), resulting in the
creation of 300,000 new homes, which means almost 50,000 more than in
2015. However, between 350,000 and 400,000 new homes are required
every year.

"In addition to high levels of migration from both the European
Union and countries afflicted by civil war, a sharp rise in student
numbers is increasing the pressure on the housing market. The rise in
demand for housing is particularly pronounced in major cities and
their surrounding areas, as well as in university cities," said Dr
Jörg Zeuner, KfW Group's Chief Economist. According to Dr Zeuner,
while the number of new homes built in 2016 will not be enough to
cover the total demand, the target of between 350,000 and 400,000 new
homes could be achieved in 2017. "Historically low interest during
construction, sufficient capacity in the construction sector, the
expansion of social housing construction and the special depreciation
allowances planned by the federal and state governments will provide
an additional boost to new construction. It is also crucial, however,
that the growing cities quickly make sufficient land available for
construction," Zeuner went on.

At the same time, KfW sees a risk of localised property bubbles
developing in sought-after housing markets. This applies to major
cities such as Berlin, Munich, Hamburg, Cologne and Frankfurt am
Main, for example, where property prices rose faster than rents over
the past year. Some investors at least seem to be speculating on
their ability to implement further rent increases based on a
continued shortage of housing. There has also been a leap in the
volume of loans issued for private residential construction (+22% in
2015). The volume of residential construction loans with interest
rates fixed for more than 10 years rose by 53%.

"The risk is growing, but it remains to be seen whether expansive
lending practices will in fact result in regional property price
bubbles," Zeuner commented. He reported that banks have maintained
their high standards for lending, and the interest rates for most
loans are fixed for more than five years. He also said that
macroprudential monitoring by the regulatory authorities has been
improved in the interest of preventing a Germany-wide property
bubble.

The current KfW Investment Barometer is available at:
www.kfw.de/investbarometer.

Pressekontakt:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM), Christine Volk,
Tel. +49 (0)69 7431 4400, Fax: +49 (0)69 7431 3266,
E-Mail: presse@kfw.de, Internet: www.kfw.de