The German rental market
With a share of nearly 55 % of the total housing stock, the rental housing market in Germany is one of the largest in absolute numbers in the EU. Given its eminent role in housing provision, policies concerning modernization of the rental housing infrastructure, especially energetic retrofitting, play a crucial role in the national energy efficiency policy.
A large share of the rental housing stock has been built in the postwar years of economic recovery and, given its age, is due for deep retrofitting right now. Given the rather simple and highly standardized construction methods of the time, this should allow for a quick uptake of modernization activities.
Despite these facts, energy efficiency modernization rates are lower than necessary in order to achieve Germany’s carbon reduction policy goals in the building sector. Studies show that annual investments in energy efficiency in the institutional rental housing industry only are short of about 4 billion € annually.
On the demand side, this can be attributed to the regionally different demographic situation. In most non-urban housing markets, the long term aggregate housing demand is decreasing, despite recent demand peaks in booming central cities. With negative real rent growth rates investment levels were hard to raise to the level needed for deep retrofitting during the last decade. In the recent market up cycle, rent levels seem to adjust not only in all major urban markets but also in second tier cities. Together with low capital costs, this may boost retrofitting investments in the housing sector.
Read more here