A roofer works on a single-family house. For the time being, owning your own house remains a dream for many people. © Jan Woitas/dpa
The demand for housing in Germany is great. But the German government has once again missed its target for new construction - despite a surprising increase in 2022. What are the prospects for this year?
Wiesbaden - For the time being, there is no improvement in sight for the housing shortage in Germany: The federal government's original goal of 400,000 new apartments per year remains clearly out of reach despite a slight increase. In 2022, 295,300 apartments were completed despite high construction prices, scarce materials and increased interest rates - 0.6 percent more than in 2021, the Federal Statistical Office announced in Wiesbaden on Tuesday. Economists warn of gloomy prospects for new construction and social consequences - because the need for housing remains high, also due to the immigration of war refugees from Ukraine.
This year, the construction industry expects a maximum of 250,000 apartments to be completed. Trade unions once again demanded a special fund worth billions for housing construction. Federal Building Minister Klara Geywitz (SPD) announced that she would boost the construction of new single-family homes with a new subsidy program. She assessed the slight increase in the number of newly built apartments last year as positive. "Construction remains stable even in the crisis," Geywitz said.
Horror scenario has failed to materialize for the time being
The construction and housing industry had repeatedly warned of a slump in new construction - this horror scenario failed to materialize for the time being. Despite the slight increase, the figures are "no reason to celebrate," said Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research at the Hans Böckler Foundation. The fact that the construction target was missed is "all the more tragic as the number of completed apartments is likely to decline in the coming years – mainly due to the recent massive rise in interest rates".
In the coalition agreement, the traffic light coalition had targeted the construction of 400,000 new apartments per year, 100,000 of which would be social housing, but also cashed in on this goal because of the consequences of the Ukraine war.
Last year, many construction projects came to a standstill due to a shortage of skilled workers and supply bottlenecks for building materials. At the end of the year, the number of apartments approved but not yet completed was 884,800. That was 38,400 more than in 2021. Of these, a good half were under construction. The increase in the construction backlog since 2008 thus continued. The average time from approval to completion has increased by about two months since global supply chains were disrupted by the Corona pandemic - from 20 months in 2020 to 22 months last year, the statisticians explained.
Dullien: Building permits collapsed by almost 30 percent
In Dullien's view, however, the large construction backlog is unlikely to be enough to lead to a sustained increase in production figures in the coming years. For example, the number of building permits fell by almost 30 percent in March. It is also possible that construction projects will be cancelled and orders cancelled or permits will expire.
"The truth is that almost everything that was still under construction has been completed," said the chief executive of the construction industry association HDB, Tim-Oliver Müller. "This cushion has now been used up." With an expected decline in production figures to 250,000, the housing shortage in the conurbations will be cemented. Even in 2024, there is hardly any improvement in sight. The Central Association of the German Construction Industry (ZDB) expects around 245,000 apartments to be completed this year. "More and more people are living in Germany, but housing construction is not keeping pace," said ZDB President Reinhard Quast.
In fact, the new building is under pressure from all sides. Because of the rise in interest rates, many builders are holding back on projects or cancelling them - from private house builders to large investors. For months, the Ifo Institute has been observing a wave of cancellations in residential construction. In February, 14.3 percent of the companies surveyed reported this. Between 2012 and 2019, the figure did not exceed 3 percent once. At the same time, craftsmen are still in short supply and construction prices have risen rapidly. On top of that, the federal government has reduced state subsidies for new construction and increased energy requirements.
Expensive loans
Another argument against a recovery in construction is that the demand for residential real estate loans is at rock bottom - many people do not want to or cannot afford to own their own property with more expensive loans. According to the Association of German Pfandbrief Banks, new business slumped by almost half in the first quarter compared to the record quarter of the previous year.
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For many families, the dream of owning their own home was burst because of higher interest rates, Geywitz said on Tuesday. That's where the federal government wants to help. On June 1, families with an income of up to 60,000 euros should be able to get low-interest loans from the state development bank KfW, said the SPD politician. The specific conditions are to be announced next week.
Calls for more social housing
"The failure to meet the housing targets is all the more dramatic because the need for housing in Germany has increased once again due to the admission of Ukrainian war refugees," says economist Dullien. For example, the Central Real Estate Committee had estimated that there will be a shortage of around 2025,700 apartments in Germany by 000. The federal government must massively promote public housing.
IG BAU is also calling for more money. The state should take 72 billion euros by 2025 in hand, said union leader Robert Feiger. 50 billion of this was to flow into the construction of social housing as a special fund. "Only then can it still work to build 100,000 social housing units per year." In addition, there would have to be 22 billion euros for affordable housing. "The crash in housing construction – Federal Finance Minister Lindner must not take this risk." dpa
