Size and Impact of Real Estate Sector and Its Role for Business Cycles and Growth

Abstract

The real estate industry is one of the most important sectors of Germany. Its development and the development of real estate values are most important to Germany’s economic business cycle and the country’s long-term growth path. On average, Germany’s real estate activities and price trends have stagnated more or less since the mid-1990s until 2006 and thus deviated from the international pattern. The underlying structural differences include, amongst others, the demographic development, the characteristics of the German real estate finance system, the fiscal policy and a decade-long low and stable general inflation. In return, the real estate sector in Germany—particularly when compared to other countries—serves rather a stabilizing function, especially in periods of economic slowdowns.