recent development of private housing markets and its consequences for elderly owners of real estate...
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Recent Development of Private Housing Marketsand its Consequences for Elderly Owners
of Real Estate in the Rural Periphery of West-Germany
An Example of a Shrinking Region in Bavaria
Ass.-Prof. Harald Standl, Ph.-D.Dept. of GeographyBamberg University, Germany
4th International Congress on Population GeographyHonkong, July 11, 2007
Steep decline
Slight decline
constant
Slight rise
Steep rise
1990 - 1998 1999 – 2020 (projected)
Changes in Population in Counties and Larger Cities of the Federal Republic of Germany
BBR Population Projection 2020
Steep decline
Slight decline
constant
Slight rise
Steep rise
BAVARIA Prognosis of Population Development
2000 – 2020 (in %) -15 and less
-14.9 till –10
-9.9 till – 5
-4.9 till 0
0.1 till 5
5.1 till 10
10.1 till 15
more than 15
MUNICH
Regional disparities will grow between
the centre (around Munich) and the northern
and eastern periphery
Research Concept and Main Questions: Results of interdisciplinary fieldworks (since 2001)
In the rural periphery of NE-Bavaria
Detaillied spatial analysis on the level of municipalities
later demographic changes +
recent population structures
amount of unoccupied
flats / houses
Prognostic scenarios for the development of ...- population- settlements- private housing markets… and …- economic consequences for elderly private owners
changes in real estate
markets+ +
Location of our study areas in the Upper Franconia district
..Selb
Hohenberg
Selb (17,000 inhabitants)Hohenberg (1,800 inhabitants)
BAVARIA
Abandoned china factory of the ROSENTHAL company / “Rainbowhouse“
Part of an old industrialised and monostructured region
In Selb, every secondworking-place inindustry got lost
during the last decade
19000
20000
21000
22000
23000
1978 1982 1986 1990 1994 1998 2002
Inhabitants
Jahr
The decline in population is not a new phenomenon!
2006
19000
18000
17000
20000
21000
22000
23000
Population development in the town of Selb (1978 – 2006)
8250
8500
8750
9000
9250
9500
9750
10000
1991 1993 1995 1997 1999 2001
Haushalte Wohnungen
Number of flats and of private households in the town of Selb
Jahr
The gap between supply and demand is growing increase in the amount of abandoned flats /
houses
households flats
year
Kappel:Distached houses, mainly built in the 1960s and 1970s
City centre:Multiple dwelling and multi purpose unitsbuilt before WW I
Spatial distribution of abandoned flats in the urban districts of Selb (2002: Ø 9 %)
Vorwerk:Multiple dwelling buildings;Social housing projectsof the 1950s and 1960s
and more
Demolition of surplus houses in Vorwerk area (2001)in two public programmes
“Social Town““Urban Restructuring / West“
Coping the problem of abandoned flats and houses
in Selb
Situation after „restructuring“ (2005):Costs: 44,000 Euro
Refurbished 50-year-old building (2005)
Example of a demolished
building in the towns centre
of Selb
...
because 7% of all buildings / flats are
empty
Hohenberg (2000):A deceptive idyll ...,
Alter des befragten Haushaltsvorstands in Bezug zur Haushaltsgröße in Hohenberg
05
1015202530354045
1-Pers.-HH 2-Pers.-HH 3-Pers.-HH 4-Pers.-HH >= 5-Pers.-HH
über 65 Jahre
51 bis 65 Jahre
36 bis 50 Jahre
19 bis 35 Jahre
Single- and 2-persons-households are clearly overaged In two out of three households the next generation
(children) is missing, mainly due to migration processes
Age of the head of a household (2001),compared to the household size in Hohenberg
%
over 65 years
51 – 65 years
36 - 50 years
19 – 35 years
Recent changes on the housing market
Despite of extremely low prices for development areas and very good conditions for construction financing, new buildings can hardly be found
the costs for developing real estate become a financial trap for the municipalities (the point of break even will never reached)
A) New building activties:
End of the 1990s the administration of Hohenberg decidedto develop a new building area (50 plots of land);
in the meantime, only 15 of them could be soldThe costs for developing lead to massive depts in
the local budget !
Due to high oversupply, flats in substandard quality cannot be rented out anymore
Most of the older apartment houses are under pressure for refurbishment
Because of constant low rental fees, the success of investments in such kind of objects is very uncertain (economically not profitable!)
Competition between private and institutional owners (suppliers) grows
B) Rented flats:
Recent changes on the housing market
The municpality of Hohenberg, as owner of several apartment houses invested 1 million € in refurbishing recently, using public loans;
But the rent fee (3.00 – 3.50 € / sqm) is still very low !
Are facing the most serious problems in marketing, due to highest surplus in offer and a most dramatic drop in prices
Most objects (built before WW II, partly multi-purpose units, some of them old farmsteads) urgently need refurbishing
Demand in this segment collapsed – like in East Germany
Most of the buyers are migrants, doing repairment as DIYer (with the help of friends and relatives) for own use (not as an investment, not for reselling or renting out).
Prices start from 25.000 €
C) Multiple dwelling units (for sale):
Recent changes on the housing market
This building in Hohenberg, sold by a bankrupt china-factory, was bought 10 years ago by a family of Turkish origin.
It was in a desparate situation, then ...
But this heritage-protected,“Old Forester-House“ (1768) in the centre of Hohenberg
stands empty since 15 years
... And this is the situation in the centre of a neighouring town- a real problem for urban development!
◙ ◙ ◙ ◙
◙
= empty building
Sellers have to be very flexible concering the prices; only then, they are able to find a buyer
Another pre-condition is that the building has to have general conveniences (no need for intensive refurbishing)
The already low demand comes from young (German) families
Well preseved buildings still can be sold for approx. 120,000 Euro (incl. the plot)
But during the next 10-15 years, this situation will change dramatically, due to the fact
that a lot of detached houses will be offered on the market (forced by illness, need of care, or death of the owners)
D) Detached Houses (for sale):
Recent changes on the housing market
Consequences for Elderly Oweners of Real Estate
Until 2020, the cohorts born between 1930 and 1940 will need intensive care (life cycle effect).
This quantitative big generation was responsible for the German “Economic Miracle“ after WW II and caused the baby-boom (with 2.5 kids in average) in the 1950s and early 1960s, as well.
By hard work these people were also able to gain some prosperity and with the help of public funding they built small detached houses for their families.
After the kids had grown up, most of them had to leave their home region, to find a job.
Now the owners of the houses are retired and will stay in their property as long as possible (remaining effect).
Private owners of real etate will not achive good market prices for their property anymore
In need of intensive health care, they have to sell their houses for a quite low amount of money
This sum will not cover the costs for a nursing home, if they have to stay there for a longer period
Vulnerability is growing, although they did their very best to make savings by investing in their private houses
This generation can be regarded as the main victim of economic decline in the shrinking region
They will lose a big part of their savings, due to the (since many years) predictible breakdown of housing markets
MANKIW & WEIL’s “Asset Meltdown”-hypothesis (1989) still has some reliabilty!
What does the future bring?
Consequences of elderly owners of real estate
