Real es­tate fore­casts: Ger­many is not go­ing to shrink

Financial Mirror (Cyprus) - - FRONT PAGE -

Ger­many is go­ing to shrink. This as­sump­tion has been the ba­sis of all long-term real es­tate mar­ket fore­casts for al­most as long as any­one cares to re­mem­ber. For decades we have been lis­ten­ing to a stuck record; again and again we have been told, “Ten years from now the pop­u­la­tion of Ger­many will fall be­low 80 mil­lion.” And the fore­casts have never been right. The largest un­cer­tainty in any de­mo­graphic forecast is the as­sump­tion made re­gard­ing net im­mi­gra­tion. All of the ma­jor fore­casts are based on net im­mi­gra­tion fore­casts of be­tween 100,000 and a max­i­mum of 200,000 per year.

And yet this is by far the least likely sce­nario. Over the last few weeks I have led count­less dis­cus­sions on this topic. The ar­gu­ments that have been raised in re­sponse are: 1. at the mo­ment, it is im­pos­si­ble to make any pre­dic­tions about fu­ture im­mi­gra­tion fig­ures; and 2. ev­ery­one knows that fore­casts are never right on the money.

On 1: Of course, no one knows ex­actly how many im­mi­grants will make Ger­many their home. But does this mean that we should con­tinue to rely on old fore­casts that are based on fig­ures of 100,000 to 200,000 new ar­rivals per year? And if so, why? Just be­cause they are old? Just be­cause we don’t dare to make any fore­casts of our own? It is ab­surd to use patently un­re­al­is­tic as­sump­tions sim­ply be­cause it is dif­fi­cult to ar­rive at al­ter­na­tive, more plau­si­ble as­sump­tions. If the as­sump­tions we have been re­ly­ing on for so many years are to be cor­rect, all im­mi­gra­tion to Ger­many would have to stop for the next ten years, par­tic­u­larly as net im­mi­gra­tion over the last few years has amounted to 400,000 per an­num, dou­ble the much toted fore­casts.

On point 2: We are not talk­ing about 100% pre­ci­sion or slight vari­a­tions. We are talk­ing about whether the fore­casts have got things right in gen­eral terms. And this is ex­actly what I have been ar­gu­ing: th­ese fore­casts are way off beam. There is no way that Ger­many is go­ing to shrink over the next few decades.

I do think that it is ex­tremely un­likely that im­mi­gra­tion will re­main at cur­rent lev­els. If it does, there is a dan­ger that Ger­man so­ci­ety will im­plode. You can al­ready ob­serve the panic that has set in. Asy­lum laws are be­ing amended on the hoof and ev­ery ef­fort is be­ing made to undo the dam­age caused by An­gela Merkel’s eu­phoric ‘open doors’ pol­icy. The as­sump­tion that 1-1.5 mil­lion refugees are go­ing to ar­rive in Ger­many ev­ery year for the fore­see­able fu­ture is just as un­re­al­is­tic as the idea that net im­mi­gra­tion fig­ures will sink back to be­tween 100,000 and 200,000 any­time soon.

Af­ter all, it doesn’t look as if any of the prob­lems that have led to the re­cent explosion in refugee num­bers are close to be­ing solved. It’s also highly un­likely that any of the peo­ple smug­glers are about to aban­don their highly lu­cra­tive crim­i­nal en­ter­prises.

And how re­al­is­tic would it be to ex­pect other Euro­pean lead­ers to align them­selves and their coun­tries with An­gela Merkel’s “Wil­lkom­men­skul­tur”? Does any­one really think that Great Bri­tain, Hun­gary or Poland are about to open their arms to mil­lions of im­mi­grants? And how likely is it that the EU is ei­ther will­ing or able to turn Europe into a “fortress” with well-se­cured ex­ter­nal bor­ders?

It is pos­si­ble that there will be re­stric­tions placed on the num­ber of fam­ily mem­bers al­lowed to join their rel­a­tives in Ger­many. But this doesn’t al­ter the fact that large num­bers of fam­ily mem­bers will still come. And those that do end up stay­ing are likely to have more chil­dren than their Ger­man peers who, as we all know, have one of the low­est fer­til­ity rates in the world.

I call on ev­ery­one who is in­volved in pro­duc­ing real es­tate mar­ket fore­casts to de­velop new sce­nar­ios. Keep­ing faith with ex­ist­ing sce­nar­ios sim­ply be­cause it is dif­fi­cult to de­velop new mod­els is an en­tirely ques­tion­able jus­ti­fi­ca­tion.

Oth­er­wise, we should all be hon­est with our­selves and sus­pend the use of all of our ex­ist­ing real es­tate mar­ket fore­casts. But would that really solve any­thing? Would we know any more in six months than we do now? And how about in twelve months?

Ev­ery long-term in­vest­ment de­ci­sion is based on fore­casts – whether ex­plicit or im­plicit. What we ur­gently need are fore­casts – for the real es­tate in­dus­try more than any other. Af­ter all, so many of our in­vest­ments are based on long-term in­vest­ment hori­zons.

Lead­ing ex­perts from a range of in­sti­tu­tions will be join­ing us to dis­cuss th­ese top­ics at the Real Es­tate Round­table on 10 De­cem­ber. I have rarely been as in­trigued by an up­com­ing event as I am by this one. Please re­quest your pro­gramme to­day by send­ing an email to: info@im­mo­bilien­runde.de.

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