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Real Estate Price Polarization Projected to Increase until 2030 in Germany

DIW Weekly Report 25/26 / 2017, S. 245-253

Christian Westermeier, Markus M. Grabka

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Demographic projections for Germany indicate a drop in the population of many regions by 2030. This is likely to have an impact on the real estate market. Our report presents the result of a model calculation of asking prices for residential real estate in Germany up to 2030 based on market data from empirica-systeme GmbH and a population projection from the Bertelsmann Foundation. Depending on the model specifications, it appears that real estate price polarization will increase by 2030. As with all model calculations, the results are subject to uncertainty. In the scenario presented here, we strictly focus on the demographic effect on real estate prices. According to our projections, in one-third of all rural districts (Landkreise) and urban districts (kreisfreie Städte), the market value of condominiums will fall by over 25 percent. This will also be the case for single- and two-family homes in one-quarter of all districts. Some regions in eastern Germany will be hit particularly hard by this development. In and around urban centers, however, the trend of rising prices is expected to continue. Our findings also show that the polarization of real estate prices might cause the inequality of wealth in Germany to rise slightly.

Markus M. Grabka

Board of Directors SOEP & Acting Division Head in the German Socio-Economic Panel study Department

JEL-Classification: G12;J11;D31
Keywords: Demographic change, property prices, projection, SOEP, Empirica-Systeme Marktdaten
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