What is a Silver Tsunami – and why is it called that?

As a silver tsunami a development on the Real estate market in which a large number of residential properties come onto the market within a relatively short period of time because their previous owners move out due to age, move into a nursing home or die. What is meant above all is this Baby boomer generationi.e. those born between 1946 and 1964, who acquired home ownership in large numbers in the second half of the 20th century.

It is no coincidence that the term is made up of “silver” and “tsunami”. “Silver” stands for the owners’ advanced age, gray hair and retirement. “Tsunami” describes the force and extent of the change: It is not about isolated sales, but about a real wave of houses and apartments that come onto the market in a manageable period of time. In countries like Switzerland, this term has been established for some time, and in Germany it is also increasingly being used to describe the coming demographic-related upheavals on the real estate market.

In the decades of the economic miracle, the early Federal Republic and the years after reunification, the baby boomers built or bought large numbers of single-family homes, semi-detached houses and condominiums. These properties are now largely owned by people who will part with their properties in the next 10 to 25 years for health, financial or family reasons. It is precisely this concentrated wave of supply that is referred to as the silver tsunami.

What is the situation in Germany – and what are the forecasts?

Estimates from the real estate platform are located in Germany Jacasa According to the national average, around 32 percent of property is owned by baby boomers. This proportion is particularly high in many rural regions, for example in the Uckermark in Brandenburg with around 48 percent, in the Ennepe-Ruhr district with around 45 percent or in the Meißen district with around 44 percent. At the same time, a remarkably high proportion of baby boomers live in their own homes in large cities; Jacasa speaks of around 57 percent of the age group living in their own property. Leipzig, among others, has noticeably high values ​​at around 80 percent and Berlin at around 77 percent, which is partly explained by the GDR past and the historically grown rental culture, in which property is generally scarcer.

Experts expect the decisive phase of the Silver Tsunami to occur between 2040 and 2050. During this period, a large proportion of baby boomers will be over 80 years old. Many of them will no longer be able or willing to live in their houses. A part will sell to the retirement or Care to finance, another part will inherit their real estate. Heirs who live in cities or other regions often decide to sell rather than use their own property. Experts assume that millions of houses and apartments in Germany will be redistributed in this way and that ownership relationships will change profoundly.

The problem is that this wave of supply does not spatially correspond to today’s demand. According to current studies, Germany has a shortage of around 1.4 million apartments, with the greatest shortages being in the affordable segment and in large cities and metropolitan areas. At the same time, many rural regions are already struggling with vacancies and population decline. But that’s exactly where a large proportion of the baby boomer houses are located.

Instead of automatically alleviating the housing shortage, the Silver Tsunami threatens to exacerbate the existing imbalance. In regions that are already structurally weak, a massive oversupply may arise, while the metropolises remain tense despite additional sales. So there are several so-called Double risk regionswhere a high proportion of older owners already face high vacancy rates. Particularly affected are the Altenburger Land with around 15 percent vacancy, Zwickau and the Vogtlandkreis with around 13 percent each, as well as districts such as Görlitz, the Erzgebirgskreis, the Burgenlandkreis, the Salzlandkreis or Stendal with vacancies around or above 10 percent. In these areas it is to be expected that many additional sales properties will meet an already weak demand.

In large cities such as Munich, Hamburg, Frankfurt or Berlin, however, the Silver Tsunami is expected to be significantly less noticeable. Baby boomer properties will also come onto the market there, but the structural undersupply of living space, immigration and limited new construction mean that a real surplus of supply is hardly to be expected. The effect here is more likely to be a slowdown in price increases than a noticeable drop in prices.

Silver Tsunami: Who benefits – and who loses?

The Silver Tsunami produces winners and losers, very differently depending on the region and the initial situation.

Development can become a problem for many owners in structurally weak regions. Anyone an older one Single family home in a region with migration, weak economic strength and a high vacancy rate, you must expect that your own property will be more difficult to sell in the future and only at a discount. When tens of thousands of houses come onto the market almost at the same time in such areas, supply increases significantly more than demand. The result can be significant price declines and long marketing times. For this reason, market observers sometimes advise owners in vulnerable regions not to delay a sale for too long if the value of the house is an important component of retirement planning.

The situation is different for owners in sought-after metropolitan areas and attractive surrounding areas. In cities with stable or growing populations, good transport connections, a solid economic basis and developed infrastructure, living space remains scarce. There, the silver tsunami is likely to act as a moderate damper rather than as a price drop. Anyone who invests in energy modernization and good maintenance at an early stage can still sell their property at reasonable prices despite increasing supply. In absolute prime locations, prices are likely to remain stable in the future rather than fall significantly.

Tenants could be among the beneficiaries, especially in regions with weak demand. As more rental apartments and single-family homes become available, the choice increases and landlords come under pressure to be more accommodating when it comes to rent levels, amenities and the condition of the property. In some rural counties, rents could stagnate or even decline. In metropolitan areas, however, tenants will probably only benefit to a limited extent from the Silver Tsunami. The housing market here remains tense for structural reasons, so that even additional properties for sale by baby boomers hardly alleviate the shortage noticeably.

Opportunities open up for young families and potential buyers, especially if they are spatially flexible. In numerous rural regions and smaller towns, single-family homes with a garden could become available in the coming decades at prices that are unthinkable in big city locations today. Anyone who can work remotely, relies on a home office or does not need a daily commute to a metropolis can take advantage of this development and purchase home ownership relatively cheaply. However, these opportunities come with risks: schools, daycare centers, medical care and local public transport are not well secured everywhere, and in regions with sustained contraction there is a risk that real estate will continue to lose value in the long term.

For society as a whole, the Silver Tsunami reveals a political failure. Demographic change and its consequences for the real estate market have been foreseeable for decades; the “wave of ownership” of the baby boomers has been well documented statistically. However, politicians have not yet managed to develop a consistent strategy that keeps rural areas attractive, adapts infrastructure and at the same time Lack of housing defused in the metropolises. Without a clear regional and housing policy, the Silver Tsunami threatens to become less of an opportunity for greater equalization and more of an intensification of existing imbalances between urban and rural areas.