The situation on the housing market in Germany is so catastrophic that it is driving voters into the arms of extremists. This is what the top representative of the real estate industry, Iris Schöberl, says. the newly elected President of the Central Real Estate Committee (ZIA), In an interview with ntv.de, she also explains why she is optimistic right now that the crisis can be resolved.
ntv.de: You have been elected president of the Central Real Estate Association (ZIA) while Germany is debating the housing shortage and construction crisis. How do you and your member companies view the situation?
Iris Schöberl: The ZIA represents the entire spectrum of the real estate industry, from architects, developers and construction companies to investors and property owners – and in all segments of the real estate market, for example residential, office, logistics or healthcare properties. There are of course different points of view. Logistics properties, for example, are still in high demand. Companies in new residential construction are currently struggling. In discussions with developers, i.e. companies that are active in new construction, I can sense a bit of fatalism. Overall, however, there is a mood: “Now more than ever”. You have to accept the current circumstances, especially the high interest rate, and make the best of it.
Iris Schöberl is President of the Central Real Estate Committee (ZIA) and Germany head of the international financial investor Columbia Threadneedle.
(Photo: Columbia Threadneedle Real Estate Partners)
Residential real estate is the sector that is in the most catastrophic situation?
This also depends on the perspective: the housing market looks good for investors, property owners and current tenants. However, it is bad for those looking for housing. People who want or need to move cannot find apartments in Germany because far too little is being built.
You mentioned high interest rates as the reason for the collapse in housing construction. But when interest rates were low, not nearly enough was built.
When there was a lot of money available because of the low interest rates, the public sector – which designates building land and issues building permits – imposed more and more requirements on those who wanted to build and took a lot of time. Building permits simply took and still take far too long. People had the feeling that they could afford it. Investors who wanted to build were happy if they could even get a building permit. This led to too little being built and too expensive. And now? I think everyone has now realized how dramatic the situation is and that the key social issue in Germany is that we create enough housing. Now there are ideas about how to do it more quickly. However, financial resources are now more limited because of the increased interest rates. That is why construction costs absolutely have to come down.
You speak of a lack of housing as a key social issue. After the European elections, we discussed a lot in Germany about the causes of political disillusionment and the shift to the right. However, the issue of housing shortages and rising rents did not come up. Is this still underestimated?
I think the impact is still underestimated. I know of surveys in which people say that affordable housing is their number one issue, even ahead of the war in Ukraine and high energy prices. Some people see the housing shortage as a failure of the state. It helps extreme parties when people feel that the politicians who are responsible for them don’t care. I was surprised that this hardly played a role in the election campaign.
We have been talking about the causes – particularly rising construction costs due to excessive bureaucracy and a lack of building land – for many years now. Politicians at federal and state level agree on this. But it would have to be implemented by the responsible municipalities, and nothing seems to be happening.
Because we were doing too well. And by that I don’t just mean the real estate industry, but also the municipalities. They could rely on so much money being poured in for real estate because investors were prepared to take on more and more. When in doubt, when the municipality designated a new building area, it also had the developer pay for the school and renovate the kindergarten. This of course drove up the price. Above all, unfortunately, it is just like this: if a mayor wants to be re-elected, it doesn’t help him to designate new building areas. On the contrary, it is usually very unpopular. Everyone complains about the housing shortage, but nobody in their own neighborhood wants new building areas or densification. The decision-makers who matter have no incentive.
So what do you want to do? Can this dilemma even be solved?
I am optimistic that something will change. Because it is really hurting now. It is not just hurting the real estate industry, it is hurting politics too. You can see that in the election results. And out of this pain, I hope, comes the realization.
Federal and state politicians are obviously aware of this. But they are simply not responsible.
They are often in the same parties as the mayors. In addition to their own scope for action in building legislation, state and federal ministers should also put pressure on their party colleagues at the grassroots level and point out their responsibility for society as a whole. In view of the crisis, I hope to see greater openness – and not just in terms of housing. In addition to housing, we have the second major issue of vacant commercial space in inner cities. Here, too, local decision-makers often tell us what is not possible. Think of the department stores that are being converted. We urgently need concepts for how we can repurpose them. But this is made almost impossible for potential investors with economically unfulfillable requirements.
Why is this so difficult? Revitalizing inner cities should be in the interest of local authorities.
There is a great need for security. The responsible department head is often worried that he might violate rules or exceed his authority. I strongly advocate that authority should be transferred from the mayors to the relevant experts so that they can approve exceptions.
This need for security – it is better to do nothing than to make a mistake or exceed one’s authority – is this perhaps the central problem behind this much-lamented bureaucracy and the stagnation of the economy at a time when we need change in many respects in Germany?
This is a social problem. For example, I see people who are afraid that approving something new will cost them their jobs. Instead, they drag out the process forever and then ask for another report to make sure that they are not vulnerable. This paralyzes the economy and paralyzes our society.
One of your key demands, which you have already mentioned, is to reduce construction costs, for example by streamlining regulations and speeding up building permits. But why should a landlord pass on this cost advantage in the current situation, in which he can rent out any apartment at almost any price?
You assume that every landlord is only interested in short-term profit maximization. But landlords also have an interest in low turnover, for example. High rents lead to higher turnover. Most importantly, lower construction costs mean that more is built. The only thing that really keeps prices down is competition. Only competition! And you can only do that by putting a lot of apartments on the market. If you go to a discount store, you can only buy such cheap food there because there is so much competition between strong retail groups. And rents will only go down if we build a lot of new buildings.
Your industry has a bad reputation. In times of cheap money, investors made a lot of money without – or at least that is the public perception – creating added value for society in the form of new, affordable housing. What contribution can you, the industry, the member companies of the ZIA make in this crisis?
I have personally invested around 1.5 billion euros in apartments for pension funds. These are not locusts. They include the pensions of employees – perhaps yours too. It shouldn’t be the case that people should be ashamed of working in the real estate industry. And that’s how it got in Berlin, for example, with the propaganda surrounding the expropriation debate. For years, investors have told me: we don’t want to invest our money in Berlin. Because they obviously didn’t want them there. The result can be seen in the statistics: a lot of new construction was done in the surrounding area.
The mood in Berlin has changed dramatically since the change of government from red-red-green to black-red. What the industry itself can do is to document more clearly what we are doing right and well. The member companies of the ZIA have adopted codes of conduct. We cannot prevent there being black sheep who evict people from apartments, turn off the heating in winter and similar bad things that have been reported. But there is no such thing among our member companies and the vast majority of investors.
Max Borowski spoke with Iris Schöberl.