In view of higher interest rates and more expensive materials, residential construction in Germany is stagnating. At the same time, the need is growing. Where does this lead?
According to the real estate industry, the tense housing market with rising rents and higher construction costs will be in crisis for years to come. When it comes to housing construction, it is “not just before twelve, and it’s not twelve. It’s kind of like quarter past three, and at six there’s a really bad awakening,” said Andreas Mattner, President of the Central Real Estate Committee (ZIA). .
The industry association assumes that around 700,000 apartments will be missing in 2025. That’s the equivalent of all the apartments that are currently available in Bremen and Saarland, said Mattner.
Higher interest rates
The construction industry is suffering from the sharp increase in the cost of building materials. As interest rates are raised in the fight against inflation, financing housing construction has also become more expensive. As a result, many consumers find it difficult to pull off their building plans. Investors are also refraining from real estate projects. According to Mattner, the financing interest is higher than the expected returns. So if you build, you pay for it.
According to the ZIA spring report, rents in Germany rose by 5.2 percent last year – compared to 3.7 percent in 2021. Consumer prices as a whole increased by 7.9 percent in 2022. The appraisers noticed a change in trend towards the end of the year in the purchase prices for apartments. In a comparison of the second and fourth quarters, prices fell by 3.2 percent.
The building loan broker Interhyp published similar figures. Accordingly, residential properties in Hamburg, Munich and Frankfurt were eight percent cheaper towards the end of the year than in the second quarter. In Berlin or Leipzig, the average prices fell by four percent.
Experts: Deficiencies cannot be remedied quickly
According to Interhyp, at the end of 2021 the average rate for a real estate loan was EUR 1166, and at the end of 2022 it would be EUR 1505 per month. “Many people can no longer afford these rates and no longer want to,” said Interhyp CFO Stefan Hillbrand. Interhyp predicts that prices for houses and apartments will continue to fall in the coming months. The market for residential real estate is currently out of balance.
According to the experts, the forecast shortage of apartments will not be resolved quickly – after all, it takes a long time for construction to be approved and completed. Even if a “super turbo for apartments” were invented, the new apartments needed would not be ready in 2025, said ZIA President Mattner to Construction Minister Klara Geywitz. He criticized that prices were also being driven up by taxes that were too high. Mattner spoke of a “state quota” of 30 to 40 percent of the “housing product”, also caused by stricter ecological requirements.
Adaptation of environmental standards during construction
Geywitz defended the adjustment of environmental standards even in times of rising prices as a result of the Ukraine war. “If you wait for a quiet moment when it’s convenient to introduce additional environmental standards, it won’t come by human means,” said the SPD politician.
She emphasized that digitization in particular could still be used to speed things up. However, she does not consider more government funding to be crucial. “What actually happens when I pour a few billion into a fully utilized planning and construction capacity,” asked Geywitz. “Then it will presumably be more expensive and it will presumably take longer.”
Productivity in construction needs to be increased. The construction industry reacted with criticism. “The industry is not suitable as a scapegoat, because it has long been ready,” said Tim-Oliver Müller, general manager of the main association of the German construction industry.
Source: Stern
