Prof. Dr. Tobias Just (FRICS) and Dr. Marian Dietzel
Given the current demand for housing, the number of residential completions in Germany is too low: Since the last census in 2011, the number of inhabitants in Germany has risen by around four million, while about three million new apartments were completed during this period. This is not enough, as buildings are pulled down every year, and – what is more important – beyond immigration from abroad, internal migration to metropolitan areas creates additional demand for housing. In none of the last few years has the target of 400,000 completed housing units as set out by the German government’s current coalition agreement been reached.
As a result of this divergence, over the past few years residential rents in Germany have risen and continue to rise sharply, especially in metropolitan areas. But in recent months, new orders and building permits for residential construction have plummeted as a cocktail of rising mortgage rates, rising construction costs, geopolitical risks and a regulatory environment that at times appears erratic have made residential construction more expensive and caused more uncertainty among private and institutional investors. This will exacerbate the situation for residential tenants, and these dynamics are also likely to leave strong macroeconomic skid marks (Just, 2023a; Just, 2023b).
Precisely because the construction industry is accounting for more than 11% of Germany’s Gross Domestic Product, and because the leading indicators of new orders and building permits are only published with a time lag, it is important to map developments in this sector in real time at best. In addition to survey-based sentiment indicators such as the ifo business climate index, analysts have started to eye search volumes generated on the Google search platform[1] and traceable via Google Trends in recent years, because the purchase of real estate is usually preceded by an extensive procurement of information via the internet. Indeed, in recent years, numerous studies have been able to show that there is a leading relationship between search volume on Google and real estate industry indicators (Hohenstatt et al. (2011); Wu and Brynjolfsson (2015); Dietzel (2016)).
