Interest rates remain low: Digitalisation in real estate in upswing

The key interest rate will remain low in 2019, causing good conditions for new project developments. The challenge will be to reconcile current projects with the future market. Especially in the field of digitalisation, the real estate business still has room for further developments.

Low interest rates and a high demand for new housing led to enormous growth in the construction and real estate industry in recent years. For three years now, the European Central Bank has kept the key interest rate at zero percent and will, most likely, not raise it in 2019 – a reason to celebrate for the real estate industry. As traditional saving instruments are unattractive to consumers, people are investing more in real estate, which leads to an upswing of project developments. The GdW Federal Association of German Housing and Real Estate Companies and the scientific InWIS institutes have now summarised the requirements for a future-oriented housing market in the study “Wohntrends 2035” (= Housing trends 2035). The study shows that sustainability and digital development are becoming indispensable in the real estate industry.

Digital living: More comfort and better energy efficiency
Digitalisation is gaining ground in the real estate sector, above all because of new building technology. In so-called smart homes, a significant reduction in CO2 emissions can be achieved by networking home automation and household appliances. Especially in new buildings, the latest supply technology is already standard in many parts. Existing buildings will need to upgrade soon. The implementation of the broadband infrastructure to the 5G mobile communications standard has already started and will enable real-time wireless data exchange. For the real estate industry this means not only an improvement of the technical systems, but also the expansion into new market segments and opportunities to develop new cooperation partners.

New housing forms for new needs
Demographic and socio-economic factors are also changing the requirements for new real estate developments. Real estate companies, for example, increasingly see the desire for more flexible living arrangements, such as objects that deliver temporary housing solutions or shared flats. In addition, people in Germany marry and start their families later in life, so that the demand for small single apartments is growing. For this reason, many project developers are focusing on micro apartments and tiny houses with optimised floor plans for younger generations. At the same time, barrier-free housing units and serviced apartments are responding to the consequences of demographic change with an aging society. As a result, the demand for outpatient and telemedicine care for the elderly continues to grow. To meet this demand, the GdW sees opportunities in an increase of existing KfW promotions, which focus on construction modifications for the elderly.

B- and C-locations as alternative for city-centre living
The GdW association also sees enormous development potential in B and C locations. Swarm cities are still experiencing strong growth, while rural areas have been shrinking for several years. However, there is often attractive living space with a close proximity to nature and recreational areas. The high real estate prices in urban areas make rural areas especially attractive to older people and families. For this reason, a corresponding housing offer must be ensured in the next years. With a strong infrastructure and fast connections to nearby cities, B and C locations can also be a real alternative for homes in the heart of a metropolitan area.

For the third time now, the GdW Federal Association of German Housing and Real Estate Companies e.V. presents a study future-oriented housing. The preceding studies were published in the years 2008 and 2013 and according to the association “are in demand until today”. The GdW study on future housing helps real estate companies recognise trends and market requirements at an early stage and integrate them into their projects.

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