Foreign Real Estate Investment in Germany

• Applicant: Dr. Jakob Miethe
• Subject Area: Economic Policy, Applied Economics
• Term: from 2022 to 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 507247269

In recent years, real estate has emerged as a central destination for international capital. This inflow of foreign capital triggered several concerns in host economies. A number of urban policy objectives, such as ensuring real estate quality standards or maintaining sustainable housing prices for the local population, can conflict with store of value or speculative motives of international investors. Additionally, qualitative evidence, notably from the Pandora Papers in 2021, shows that real estate is a central mode for illicit financial flows. Despite an abundance of qualitative examples and a number of concerns on the side of policy makers, quantitative research on international real estate investments is scarce. The secrecy introduced through offshore constructs and the underdeveloped state of corporate registers makes quantitative analyses difficult. The project proposed here (a) starts work on a register documenting corporate investment in German real estate (b) it establishes and evaluates international ownership chains of these corporate structures and (c) uses tools employed in the literature on tax haven capital flows to evaluate the impact of foreign investment on prices and inequality. The project will therefore make it possible to trace ownership of a real estate title through its international chain of corporate ownership to their ultimate beneficial owner and to ascertain the impact such investment has. This database is then used to answer three research questions about Germany in particular. First, I will address the question if and by how much foreign real estate investment fueled the unusually high price increases in German real estate markets documented in the literature. Second, I ask how Germany’s real estate market as a renter (opposed to an owner market) exacerbates conflicts between store of value/speculative motives of investors and housing objectives of host cities. Third, I will start an exploratory analysis to establish how much international but also intra-German real estate investment contributed to inequality trends in Germany. This project pursues two aims: It starts the overdue process of creating useful registers of corporate real estate holdings in Germany and it provides several angles that show how such a database can be exploited for policy relevant economic research.

• DFG Programme: WBP Fellowship
• International Connection: USA
• Host: Professor Dr. Gabriel Zucman