Germany Housing Market Analysis Essay

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Economic Analysis & Core Competencies

Economic Analysis

Germany is an industrialized economy, and one of the wealthiest countries in the world. It's GDP ranks 5th in the world, and is the largest in the European Union. The Germany economy is highly-diversified, and there is a strong manufacturing sector. As part of the European Union, Germany trades within the world's largest economy. This also means that all European companies have access to the German market, which makes this market highly competitive. The growth rate of the German economy is relatively slow, at just 1.6%, following two years of very slow growth (CIA World Factbook, 2015).

The per capita GDP is $46,200. This figure is growing slowly. Germany presently ranks 27th in the world in this category, in line with Australia, Taiwan, Canada and Sweden. Most of the world's biggest GDP per capita figures come from city states or from oil nations. The United States, at 19th, has a per capita GDP of $54,400 for comparison, but Germany's figure is in line with other leading economies (CIA World Factbook, 2015).

Germany's currency in the euro. This is a common currency for most of the EU countries, and means that monetary policy is run by the European Central Bank. Germany, however, has the greatest influence over this because it is the biggest economy within the group of countries that use the euro. Despite its dominance over monetary policy, being a part of the Eurozone has been one of the contributing factors to Germany's recent economic weakness. It is a dominant exporter in Europe, which is good for the German economy, but the Eurozone has been a problem. The issue with Greece has been a drag on the German economy as the country has not only been forced to bail out Greece but has also had to deal with the negative effects that the ongoing uncertainty has created.

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Germany has done its best under the circumstances to minimize the damage created by Greece (Irwin, 2015).

Another threat to the German economy is with the Volkswagen scandal. This scandal relates to falsifying data that led to Europe supporting diesel vehicles over gasoline ones. This scandal is likely going to cost the German auto industry significantly. Volkswagen will definitely suffer, and it is one of Germany's biggest employers. The fallout could spread to BMW and Daimler as well. This threat to a major industry represents a substantial threat to the German economy as a whole, because automobiles are worth $225 billion in exports for Germany (Nienaber, 2015).

The strength of the German economy is important because the housing construction business typically requires an underpinning of economic growth, combined with population growth. Germany's population growth is relatively slow -- it is actually shrinking (CIA World Factbook, 2015). Thus, the growth of the construction sector is entirely dependent on growth in the German economy. Growth rates in construction, however are faster than the rate of growth in the economy as a whole. The construction growth rate was 3.3% in 2014 and 2.1% in 2015. Volume is growing even faster, which indicates that the industry is healthy, but that price growth is being constrained either by competition or by the general struggles of the German economy. Nevertheless, there is reason for optimism that Germany's housing market is stronger than the economy overall, something that should encourage Toll Brothers (Gorning & Micholson, 2015).

There is also the choice of where to start the business in Germany. It is a big country, and there are some significant differences between the different states. The states with the strongest economies are the industrial heartland of Nordrhein-Westfalen, Bavaria and Baden-Wurttemberg. These three states account for over half of the German economy. Further,.....

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