The goal of 400,000 new homes annually was already ambitious before the war in Ukraine. Now prices are exploding, there is a shortage of building materials and interest rates are rising. Time to redefine the plan?
Despite dark signs in the construction industry, the federal and state governments want to stick to the goal of 400,000 new apartments per year. “The goal is the goal. And the goal is not a political invention, but derived from needs,” said Federal Building Minister Klara Geywitz (SPD) on Friday after the two-day building ministers’ conference in Stuttgart. Industry and union representatives had previously expressed doubts about the plans.
It is clear that the shortage of skilled workers, rising interest rates and material shortages will not make things any easier, Geywitz said. Efforts must now be intensified. While there have recently been significantly fewer building applications for single-family houses, there has also been an increase in applications for multi-family houses. In addition, there is a backlog of 847,000 apartments – these are apartments that have been approved but are not yet finished.
Conference chairwoman Nicole Razavi (CDU), the building minister of Baden-Württemberg, warned of a dramatic situation in housing construction. Supply bottlenecks, rising energy prices, construction prices and interest rates, and labor shortages made for a toxic mix. She spoke of a turning point in building and living. “The crisis endangers the housing policy goals of the federal and state governments.”
In a joint statement, the department heads of the federal states predicted “that over 200,000 apartments will be completed in Germany this year and will therefore be available for occupancy”. This number results from the building permits issued in previous years and the planned construction projects. The building ministers confirmed that they still want to stick to the target of 400,000 apartments per year, including 100,000 social housing units. Around 293,000 new apartments were completed in 2021.
The situation in the building deteriorates
Figures from the Federal Statistical Office on Friday also made it clear that the situation in construction is deteriorating: According to this, the main construction trades recorded a higher order volume in July than a year earlier due to higher prices. Price-adjusted (real), however, order intake was 5.8 percent lower. For the first seven months of this year together, there is a real decline in incoming orders of 3.8 percent compared to the same period last year.
The Central Association of the German Construction Industry had previously reported a sharp drop in incoming orders. The association sees the goal of 400,000 new apartments as a long way off. The head of the IG BAU union, Robert Feiger, described the project to the editorial network Germany (RND/Friday) as “sporty and ambitious”. In order to achieve it, the Ministry of Construction would have to triple the state housing funds.
As is usual at such conferences of specialist ministers, the building ministers also formulated several demands on the federal government: For example, the federal government must make the funding options for social housing more flexible, not only look at the insulation of individual houses in energy-efficient construction and, if possible, bear the costs of a housing benefit reform alone. A specific resolution also emerged: the distance specifications for solar systems on roofs are to be reduced. This paves the way for more solar systems to be placed on mid-terrace houses, for example.
The new building in Germany has come to a standstill due to material supply bottlenecks, sharply rising prices and more expensive financing. Project developers who plan entire residential or commercial areas are reluctant because they can hardly calculate. Private householders are also canceling construction projects due to cost increases. The Munich Ifo Institute is observing an increasing number of cancellations in residential construction.
10.2 percent more for residential real estate
Residential real estate prices continued to rise in the second quarter. Houses and apartments rose in price for the fifth quarter in a row by more than ten percent compared to the same quarter in the previous year. From April to June, the prices for residential real estate rose by an average of 10.2 percent compared to the same period last year, as the Federal Statistical Office announced on Friday. However, the price increase slowed down somewhat.
In view of rising building interest rates, expensive building materials and delivery bottlenecks, experts expect the real estate boom in Germany, which has been going on for more than ten years, to slow down. Hamburg’s GEWOS Institute for Urban, Regional and Housing Research expects real estate sales to fall by seven percent this year to 313.5 billion euros – that would be the sharpest decline since 2009, after the global outbreak financial and economic crisis.