As of: February 20, 2024, 5:08 p.m
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Federal Finance Minister Christian Lindner and Economics Minister Robert Habeck in the German Bundestag.
© Imago/dts news agency
The construction industry in Germany is under massive pressure.
A lack of investment and high interest rates mean that the goal of 400,000 new apartments per year is a long way off.
Berlin - High interest rates, increased material costs, expensive properties: According to the so-called real estate experts, the federal government will miss its housing construction target even more in the future given the difficult environment.
“The crisis is deeper than the building completion and building permit figures show so far,” says the expert committee’s spring report published on Tuesday (February 20).
“No longer competitive” – German housing construction is probably in crisis
Housing construction is still based on projects that were started before the significant interest rate increases.
Given the collapse in approval numbers and taking construction times into account, completions are likely to fall to 150,000 per year.
The federal government's target of 400,000 - a central project of the traffic light coalition - is now a long way off.
“With the current levels of interest rates, building land prices, construction costs and rents, building new apartments is not worthwhile,” warn the experts.
According to estimates, by 2023 the mark will have already been significantly missed at around 270,000.
“We are no longer competitive in Germany when it comes to building,” said the President of the Central Real Estate Committee (ZIA), Andreas Mattner, in Berlin when presenting the report.
There was already a shortage of more than 600,000 apartments in Germany this year.
This number will rise to 720,000 by next year and even to 830,000 by 2027.
“The experts’ analysis is not just a wake-up call, but in some respects a real siren alarm,” said Mattner.
He criticized the high financial burden caused by taxes, duties and government requirements.
This state quota is 37 percent of the production costs.
“It is the state that is making the big bucks here,” said the ZIA president.
“In a deep crisis”
The main reason for the development, which means that there is an increasing lack of affordable housing, especially in metropolises, is the interest rates that have risen since spring 2022.
“It was a rapid rise in interest rates,” said real estate sage Lars Feld.
As a result, the interest-sensitive construction industry got into trouble.
Almost suddenly, all housing projects have become uneconomical, said real estate expert Harald Simons.
The result is a virtual halt in housing construction.
“New residential construction is in a deep crisis,” said Simons.
According to the ZIA, a “black zero” for new residential developments is only achieved at an average rent of 21 euros per square meter.
“That is not possible,” said ZIA President Mattner.
“So whoever builds goes bankrupt.”
In order to change the misery, the ZIA is proposing a program from the state development bank KfW that would reduce market interest rates to two percent.
With a funding amount of three billion euros, this would bring about 100,000 additional apartments.
A temporary waiver of real estate transfer tax or municipal levies on housing construction would also be “super turbo,” said Mattner.
The association also considers the tax incentives through declining depreciation desired by the Federal Government and Bundestag to be indispensable.
This is part of the so-called Growth Opportunities Act, which is met with resistance in the Federal Council, especially from the Union.
Germany is not alone in Europe
Federal Construction Minister Klara Geywitz is counting on housing construction to pick up again and referred to state funding.
In addition, interest rates have fallen again, while prices for building materials have normalized and real incomes are likely to rise.
The federal government will invest 18 billion euros in social housing by 2027.
“This is an absolute record sum,” said Geywitz.
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Germany is not alone with its problems on the real estate market.
In Europe, investments in new residential buildings would be 6.4 percent lower in 2026 than in 2023, as the Munich Ifo Institute announced.
It referred to forecasts from the Euroconstruct research group, of which the Ifo Institute is a member.
In Europe, the number of completed apartments will only be a good 1.5 million units by 2026 - a decrease of 13 percent compared to 2023. The situation is particularly difficult in Sweden with a decrease of 47 percent.
The reasons for this are sharply increased construction costs, expensive loans and less financial flexibility for private households, as Ifo expert Ludwig Dorffmeister said.
(Reuters, lf)