OREANDA-NEWS. Housing construction in Germany is still going strong. The KfW Own Home Construction Indicator for March increased by 2 percentage points on the same month of the previous year. Although it slipped by -1.2 percentage points on the previous month, this indicator and other early indicators point to a steady upward trend supported by favourable overall conditions. Low interest rates, rising incomes, a robust labour market and high investor preference for real assets continue to provide an optimal environment for construction activity. In 2013 the number of newly built homes is likely to be just over 200,000.

The pace of new construction activity increased already in 2012 while total construction investment dropped by 1.5% against the previous year. The decline was limited to non-housing construction, which fell by nearly 5% against 2011. The main cause of this was the significant decline in public construction investment after the stimulus packages were phased out. In contrast, housing construction investment overall rose last year by just under 1% against the previous year.

"Housing construction overall and, thus, new construction activity will remain the driver of growth in 2013 as well", said Dr Jцrg Zeuner, Chief Economist of KfW Bankengruppe. "We expect some 204,000 new homes in total".

Despite this welcome trend, Dr Zeuner warned that "in order to meet the existing need for housing in urban areas, even more homes would have to be built or completed each year." The trend towards smaller households, rising household numbers and increasing living space per household, along with migration to the cities, creates a growing need for housing. "Even at the current pace, new home construction is insufficient to dampen the price increases for residential property, especially in urban areas", said Zeuner.