Frankfurt – The familiar plea, "Young family seeks affordable three-room apartment," is a common refrain in Germany’s major cities, highlighting the persistent scarcity of affordable housing in densely populated areas. However, a crucial question looms: could the ongoing demographic transformation in Germany offer a natural solution to this pressing issue in the coming years? The theory is intuitively plausible: as the large baby boomer generation retires and their children have long since moved out, their homes and apartments are expected to enter the market, a phenomenon often dubbed the "Silver Tsunami."

Recent analyses by the Institute of the German Economy (IW) in Cologne, based on exclusive data obtained by Handelsblatt, delve into the potential consequences of this demographic shift. The study meticulously examines all 400 German districts and cities to pinpoint regions where the aging population might exert downward pressure on real estate prices and, conversely, where such pressure is unlikely to materialize.

"The demographic change in the real estate market is real," stated Pekka Sagner, a real estate expert at IW and lead author of the study. "In most federal states, the proportion of homeowner households aged 65 and over, who could potentially part with their properties over the next decades, stands at approximately 28 to 32 percent."

However, significant regional disparities exist. Wilhelmshaven leads the nation with 38 percent of its older homeowners, followed by Dessau-Roßlau at 37 percent. Baden-Baden, Kempten, and Bremen each report 36 percent. These figures represent the latent supply of housing that could become available as this generation ages.

The Interplay of Supply and Demand

Crucially, the study emphasizes that the potential supply of housing alone is not the sole determinant of price trends. An equally vital factor is the size of the potential buyer pool. For the first time, the IW study has cross-referenced these two critical demographic trends. "Potential supply and potential demand must also align geographically," Sagner explained.

The research identifies renter households between the ages of 30 and 44 as the primary group of potential homebuyers. This age cohort tends to concentrate in economically vibrant urban centers. Munich, Stuttgart, and Frankfurt each attract around 29 percent of renter households in this demographic. Düsseldorf and Cologne follow with 27 percent, while Berlin and Hamburg each stand at 26 percent.

This creates a stark contrast: regions with a high concentration of older homeowners do not necessarily face the greatest risks of sales pressure and price declines. The decisive factor is the presence of sufficient younger households actively seeking to purchase property.

Regional Divergence: Rural Areas vs. Metropolises

The study’s findings reveal that in economically weaker and more rural regions, there are often numerous older homeowners but comparatively few younger households looking to acquire property. The situation is reversed in metropolitan areas.

In approximately 300 out of the 400 districts analyzed, the potential supply from homeowners aged 65 and over exceeds the potential demand from younger buyers. "If the latent supply is narrowed down to older households aged 75 and over, a theoretical surplus remains in only 91 districts," Sagner qualified.

"Younger renter households looking to purchase property can expect a significant increase in the number of older homeowners entering the market in the coming years, particularly in the Südwestpfalz, Kusel, St. Wendel, Kronach, and Freyung-Grafenau regions," the IW expert noted.

Metropolitan Markets: A Different Landscape

In these specific rural or economically less dynamic regions, the generational change can indeed lead to a structural oversupply and, consequently, to declining prices. When a large number of homes enter the market simultaneously while the number of potential buyers shrinks, sellers face increased pressure. This is particularly true for areas with weak population growth, limited economic dynamism, and already high homeownership rates.

The scenario in Germany’s major cities presents a dramatically different picture. Berlin, for instance, serves as an extreme case. Approximately 90,000 homeowner households aged 65 and over stand in contrast to roughly 434,000 renter households aged 30 to 44. Theoretically, the available supply from older homeowners is 79 percent below the potential demand.

Hamburg exhibits a similar imbalance, with potential supply falling 68 percent short of potential demand. Düsseldorf and Munich also show a gap of 68 percent, followed by Cologne at 64 percent. Stuttgart registers a deficit of 51 percent, while Frankfurt stands at minus 77 percent.

According to the study’s authors, this imbalance is the critical factor for price development. Even if more properties from older homeowners enter the market in these cities in the coming years, it is unlikely to be sufficient to absorb the existing demand overhang. In Frankfurt, for example, approximately 21,000 older homeowner households face an estimated 90,000 potential younger renter households.

"The study shows that the strong pressure on the housing market in metropolitan areas will not ease," stated Florian Rentsch, Chairman of the Board of the Sparda-Banken association. "The so-called Silver Tsunami is therefore more of a myth. There will not be a uniform German real estate market where baby boomers automatically drive down prices."

For metropolitan areas, the generational shift represents an opportunity to increase supply rather than a catalyst for price collapse. While inherited or sold properties can augment the housing stock, they will meet a substantial number of households actively seeking to acquire property. Consequently, the demographic effect alone is unlikely to resolve the structural scarcity in large cities.

The Periphery’s Limited Impact

Even when including the surrounding districts, the study indicates that this does not fully resolve the demand overhang in major metropolitan areas. Considering the ratio of older homeowners to younger renters, even with the inclusion of suburban areas, Berlin still faces a shortfall of 308,000 households, or 71 percent. Munich reports a deficit of 65 percent, Hamburg 48 percent, and Frankfurt also 48 percent. Only Stuttgart, with a gap of 14 percent, comes closer to a theoretical equilibrium.

However, the study introduces a crucial caveat: a 65-year-old homeowner is not automatically a potential seller. Many older individuals remain in their existing homes or apartments, even after their children have moved out. The study points to low residential mobility, emotional attachments, transaction costs, and a lack of smaller, accessible living alternatives as significant factors.

Larger Homes for Older Generations

This observation is also reflected in housing space consumption. Homeowners aged 65 and over typically occupy around 65 to 70 square meters of living space per person. By age 75, this figure increases to over 70 square meters, and in very elderly age groups, it can reach approximately 80 square meters. On average, older homeowners have nearly twice the amount of living space per person compared to renters in the typical phase before potential homeownership.

"Therefore, the upcoming major generational change in the real estate market over the next 20 years certainly presents an opportunity for housing policy," Rentsch emphasized. "However, policymakers would be making it too easy for themselves if they relied solely on demographic change."

He suggests that "new incentives are needed, particularly for older homeowners, to encourage them to leave their current homes." This calls for "creative ideas." Furthermore, infrastructure development and improved connectivity of rural regions to metropolitan areas should play a more significant role in the future.

"What is now needed is strengthened structural policy that supports these rural regions, especially in anticipation of the demographic effects surrounding the baby boomer generation, and positions them as favorably as possible," echoed Stephan Kippes of the IVD real estate association.

Conclusion: Demographic Change Alone Doesn’t Move the Market

For potential homebuyers, this analysis yields a clear implication: those speculating on falling prices due to the generational shift should focus less on the age of the population and more on the local balance of supply and demand. In regions like Saarland or in rural districts of West Germany, aging may indeed lead to increased seller pressure. However, in cities such as Frankfurt, Munich, Berlin, or Hamburg, the properties of the baby boomers are unlikely to be sufficient to alleviate the structural housing shortage. The demographic dividend, while present, is unevenly distributed and requires targeted policy interventions to fully leverage its potential.