As of: February 26, 2024, 5:22 p.m
By: Lars-Eric Nievelstein
Comments
Press
Split
German housing construction is in crisis.
Although there are ambitious goals, the companies cannot keep up with the construction.
On the contrary: more and more construction companies are running into financial difficulties.
Berlin – The government wants to build 400,000 apartments per year.
Experts assume that there will be a shortage of around 600,000 apartments in 2024 alone; the Pestel Institute even sees a gap of over 900,000 apartments - and that's just social housing.
Only one thing is certain: there is not enough living space.
German real estate construction is in a deep crisis.
Insolvencies of housing construction companies are expected to exacerbate this development.
New homes targeted by the government per year |
400,000 |
|---|---|
Tax rate in German housing construction |
37 percent |
Apartments actually built in 2023 |
Around 270,000 (federal government) |
Financing is running out - further insolvencies in residential construction are expected
One of the drivers for the current development is the decline of René Benko's Signa Group.
Since the first companies filed for bankruptcy last year, many more have gradually followed suit, and there is still no end in sight.
In Baden-Württemberg alone, over 8,000 employees are affected by the insolvencies of their companies.
“There will definitely be more to come,”
Handelsblatt
quoted Berlin real estate consultant Markus Viering as saying.
“A lot of financing will expire in the near future.” Either the companies would then have to receive new capital, or insolvencies would inevitably follow.
According to Viering, this will primarily affect “many small” project developers.
Turmoil in housing construction – “Definitely more bankruptcies” are imminent © IMAGO/photonews.at/Georges Schneider
Such a wave would be a catastrophe for home buyers, especially for those who have already paid off part of - if not all of - their home.
“Especially when it comes to building new condominiums, 100 or more buyers can quickly be affected,” explained the expert.
Although the construction companies could still complete such projects that have already reached a certain level of construction, if not, this could mean a total loss for the buyers.
They would usually have already paid part of their money for services provided.
Two months delay in bankruptcy
According to Viering, such housing projects can certainly be completed through a compromise.
However, everyone involved would have to be ready for this, from the insolvency administrator to the apartment buyers.
“There are projects that are already 95 percent completed when the project developer goes bankrupt.”
In such cases, it is possible to determine the status of the project after comparing the opportunities and risks and then complete it.
If everyone involved cooperates, “we might be talking about a two-month delay,” explained Viering.
For “regular” bankruptcies, one can assume two to three years, if at all.
The German construction industry is in crisis
The growing number of bankruptcies shows the extent of the crisis in German housing construction.
Most recently, the project developer Schoofs Immobilien GmbH from Frankfurt filed for bankruptcy, placing itself behind the Signa Group's luxury department store project, the Elbtower and many others.
In February, the Central Association of the German Construction Industry spoke of the “biggest crisis since the 1990s”.
There are fewer and fewer orders received and the number of building permits is also falling.
My news
German family business files for bankruptcy - 150 employees affected read
With this trick, pensioners pay significantly less for car insurance
Because of pensions: economics calculates with traffic lights – read “Will lead us into the abyss”.
When it comes to work-life balance, top economist demands: “We should all learn a lesson from Generation Z”.
USA is now hunting Putin's henchmen - to the annoyance of the Kremlin
Pension increase in summer 2024: Heil gives the first forecast for pensioners
“Of course the mood in construction is bad under such circumstances,” said Tim-Oliver Müller, Managing Director of the BAUINDUSTRIE, in an association report.
“Given the desolate situation on the housing construction market, this is no wonder.” However, the companies remain “optimistic about their purpose”.
Hardly any domestic political issue will play such an “explosive” role in the coming months and in the 2025 election campaign.
Taxes and construction costs are overwhelming home builders
In addition to the significantly increased material costs, the high government taxes are largely responsible for the gloomy situation.
According to Andreas Mattner, President of the Central Real Estate Committee, Germany is the European “state quota champion”.
This refers to government-related costs for housing construction, for example property transfer tax, sales tax or technical building regulations.
In Germany the rate is 37 percent, well above the European average.
In Austria, for example, it is seven percent and in France it is 19 percent.
Mattner suggested reducing the rate to 22 percent, then the rents would also be correspondingly lower.
Tanja Gönner from the Federation of German Industries (BDI) echoes the same sentiments;
Germany cannot keep up with the competition between tax systems.
When it comes to other location factors, such as tax support for research, the Federal Republic is also “significantly” lagging behind.
The mood in the German construction industry is currently at a low point.
The BDI calls for the Growth Opportunities Act to be passed quickly.
“The modernization and digitalization of corporate taxes are long overdue.”