European Economy. Economic Papers. Germany's growth performance in the 1990's

West Germany
One- or two
family
houses
181,633
164,101
141,864
156,130
167,322
185,257
182,907
Apartment
houses
255,966
263,439
213,958
186,385
155,387
139,282
115,403
Others
67,580
71,003
60,300
57,835
49,534
45,234
38,450
Total
505,179
498,543
416,122
400,350
372,243
369,773
336,760
East Germany
One- or two
family
houses
30,721
41,064
46,938
54,926
53,289
52,074
46,808
Apartment
houses
28,343
49,042
78,215
99,201
53,013
28,032
21,042
Others
8,640
14,108
18,213
23,702
22,145
22,759
18,434
Total
67,704
104,214
143,366
177,829
128,447
102,865
86,284
Source : Statistisches Bundesamt
However, Table B2.2 also indicates that in nominal terms the decline in the West between its
1995 peak and the year 2000 (115,403) was more important. Up to 1995, the strong rise in
population in West Germany from 1987 on evidently had a huge impact on demand for rental
apartments. Furthermore, since the mid-1990s the federal government has drastically cut back
public subsidies to low-cost housing and has at the same time changed its strategy in this area
from ‘object-oriented subsidisation’ to ‘subject-oriented subsidisation’. While the overall
effect might not have been very important in financial terms, it appears that the marginal
effect on the yields of apartments may have affect investment decision more strongly. This
holds true the more for high income earners, as investment in newly constructed apartments
for rent heavily depend on depreciation allowances. But a falling marginal tax-rate as
introduced by the latest German tax reform package reduces the profitability of investment in
property.

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