One price record is chasing the next in the real estate market. Housing prices, for instance, are said to have risen by an average of three percent across Germany during the second quarter of this year compared with the first three months, resulting in a year-on-year increase of 6.3 percent. The Central Bank’s low-interest policy and local authorities who are allocating too little land for construction are seen as the price drivers here. But there is another aspect that has long been ignored: “Lots are being bought and/or sold by private owners in many cases without any clear intention of developing them,” says Gordon Gorski, Managing Director of HOCHTIEF Projektentwicklung GmbH.
The Handelsblatt puts it in a similar way: “Speculators are hoarding urgently-needed construction land in central locations instead of building on it or selling it on.” This behavior is increasingly being criticized both by politicians and the real estate industry itself—because more and more lots suitable for construction are simply lying abandoned because the owners are speculating that prices will rise still further. This means that construction land is being withheld from the market, that supply is being artificially restricted, that construction is being delayed and that, above all, the price of housing continues to be forced upwards. “The real winners of the real estate boom are the lot traders,” Gorski remarks. “Previously a developer in the metropolises of Berlin, Düsseldorf, Frankfurt, Hamburg and Stuttgart would have calculated the lot as being worth 20 percent of the price of the residential unit. Today he has to calculate it as 40 percent.” Munich, which has always been a little more expensive, may soon be overtaken by Berlin.
This is because, as the Handelsblatt points out, speculation on higher lot prices in recent years has namely been particularly worthwhile in the federal capital. The newspaper draws attention to the real estate market report produced by the Berlin Gutachterausschuss (expert committee) which says that standard land values inside the light rail (S-Bahn) ring for multistory residential construction were 50 percent higher than in the previous year. Outside the light rail ring, where buildings cannot be constructed so high, there was an increase of 30 percent. The Handelsblatt also gives a concrete sample calculation: a lot in Berlin-Mitte which sold for 20 million euros two-and-a-half years ago is said to have changed hands recently for 90 million euros. Gorski says that with prices being forced up like this, developers are hitting the limit for housing prices that can still be obtained in the market—and not only in Berlin.
Politicians are debating how speculation with development-ready lots can be stemmed. When it comes to the idea of levying a heavier land tax on unbuilt land, opinions are split among those representing the interests of the real estate industry. Some are calling for arrangements for necessary exceptions; others in turn fundamentally reject such taxation and are instead calling for grants. Gorski makes the following suggestion: construction permits should expire exactly one year after they were issued. This would force the owner to either build himself or to sell the lot immediately to someone who is willing to do so.