Explainer-Why Germany's property sector is in the dumps
By Tom Sims
FRANKFURT (Reuters) — Germany has long benefited from an era of cheap money that fuelled a decade-long boom in real estate, but now the sector is grappling with a major turn of fortune.
In the latest signs of stress in the sector, Germany's largest real estate group Vonovia posted multi-billion euro losses and writedowns, and job growth for construction workers has stagnated.
Here are some key questions as the crisis unfolds:
WHY DO WE CARE ABOUT GERMANY?
Weakness in real estate has also emerged in the United States and Sweden, but Germany is significant because it is Europe's largest economy and the biggest real estate investment market on the continent.
The property sector makes up roughly a fifth of economic output and one in ten jobs, according to the German Property Federation.
HOW BAD IS IT?
New construction plummeted in Germany during the first half of the year, dropping 47% compared with the average of the past two years, and new building permits plunged 27% during the first five months.
Home prices also declined in the first quarter by the most since Germany's statistics office began keeping data, down 6.8% from a year earlier.
In September, data will show to what extent the trend is continuing and shed light on the state of construction jobs.
«The current crisis will certainly continue for a while yet,» said Sven Carstensen, chief executive of Bulwiengesa, a property consultant and analysis firm.
WHAT'S BEHIND THE SLUMP?
The main factor has been a sudden and rapid rise in interest rates by the European Central Bank as it clamps down on the highest inflation rates in decades, but there's more to it.
Building costs have also soared, and the demand for offices and retail space has waned after the
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