Germans pour wealth into ′concrete gold′ | Business| Economy and finance news from a German perspective | DW | 16.03.2012
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Germans pour wealth into 'concrete gold'

Rising inflation and historically low interest rates propelled the German housing market to a 20-year high last year. Fears of a real estate bubble appear to be unfounded, experts say.

German authorities issued 228,000 building permits in 2011, which represents an increase of 40,700 compared to 2010, the federal statistics office, Destatis, announced Friday.

Investment in 'concrete gold' - as private home building is colloquially called in Germany - soared 21.7 percent, up from 5.5 percent in 2010, and marking the steepest rise since 1993, Destatis said.

With 200,100 units, most of the new permits issued were for new homes or apartments, Destatis added. The rest was permits for reconstructing existing housing.

According to a construction industry official, the building boom was "fuelled" by a growing economy, including "safe jobs and rising income expectations."

"In addition, fear of more inflation in the wake of the eurozone debt crisis is causing people to consider building or buying their own homes," Karl-Heinz Schneider, chairman of the industry lobby group Bundesvereinigung Bauwirtschaft, told dpa news agency.

Industry growth

According to Destatis data, 45.7 percent of the 37 million homes in Germany were inhabited by their owners in 2010. That was 4.1 percent more than four years ago, the office said.

"The increase is still not big enough to meet growing demand," Schneider said.

The German construction industry was expecting revenues to rise as well in 2012, driven by an "ongoing boom in demand from private homebuilders."

However, Schneider said the strong 18 percent revenue growth for this sector of the building industry in 2011 would not be repeated, adding that a 5 percent increase was "more realistic" for this year.

The whole industry, including industrial construction, was set rise by just one percent in 2012, after robust overall growth of 7 percent in 2011.

uhe/sms (dpa, AFP)