Germany urgently needs more housing – but according to experts, the prospects are bleak. Among other things, the states are required.
Real estate industry experts are warning of dramatic slumps in German housing construction. When presenting its spring report, the Council of Real Estate Experts criticized, among other things, high state taxes and sometimes inadequate funding offers. According to experts, there is a shortage of 600,000 apartments in Germany this year. By 2027 there should be 830,000. According to the Ifo Institute, the number of new apartments built annually could decline by 35 percent by 2026 compared to last year.
“Building is actually impossible today,” said the President of the Central Real Estate Committee, Andreas Mattner, on Tuesday. New housing developers would only break even with an average rent of 21 euros. “Anyone who builds today will go bankrupt.” The federal government’s goal of building 400,000 apartments a year is becoming a long way off, said real estate expert and director of the Walter Eucken Institute, Lars Feld.
Forecast: Fewer apartments only in Sweden
According to a forecast by the Euroconstruct research network, of which the Ifo Institute is a member, 175,000 residential units are likely to be completed in Germany in 2026 – 95,000 fewer than in 2023. According to the forecast, the number of completed apartments in the 19 European countries examined in the coming years will only be in Sweden stronger than in Germany.
“Especially because of the sharp increase in construction and financing costs, new housing construction is often no longer possible in Germany,” criticized Ifo construction expert Ludwig Dorffmeister. “Politicians have not yet significantly improved the general conditions.”
“European champion in the state quota”
According to real estate experts, one of the reasons for the gloomy situation is high government taxes. Germany is the “European champion when it comes to state quotas,” explained Mattner. This refers to government-related costs when building apartments, such as property transfer tax, sales tax, technical building regulations or energy requirements.
The state quota in Germany is currently 37 percent, which is significantly higher than other European countries such as Austria (7 percent), France (19 percent) or Poland (30 percent). If the rate were reduced to 22 percent, for example, rents of currently 15 euros would still be 12.80 euros, explained Mattner. “It could be so easy.”
Above all, the federal states are asked to suspend the real estate transfer tax and municipal levy programs, demanded Mattner. Federal Construction Minister Klara Geywitz warned that construction investors today cannot finance daycare centers and roads beyond this tax. “The states have been increasing the real estate transfer tax. Now they have to examine what contribution they can make by reducing the real estate transfer tax.”
Reasons for hope
The SPD politician said it had been “anything but easy years” for the construction industry. However, there are developments that give cause for hope. Interest rates have fallen slightly again, the prices of many building materials have normalized and there has been a slight recovery in construction orders.
The ZIA positively assesses the new funding program for climate-friendly new buildings in the low-price segment, for which the federal government wants to make one billion euros available in 2024. But the association is pushing for a bigger step: a KfW program that reduces market interest rates to two percent would bring 100,000 additional apartments with a funding amount of three billion euros. At nine billion euros there would be 300,000 new apartments. That would be “an important turning point for the housing market”. A temporary waiver of real estate transfer tax or municipal levies would be a “super boost” for the industry, said Mattner.
Construction Industry for Growth Opportunities Act
The Growth Opportunities Act is a “step in the right direction,” said Feld. “I think it is completely wrong to make a connection between a law that tries to create better conditions for business investment and tax subsidies in the context of agricultural diesel.” That has nothing to do with each other.
The Federal Council had blocked the Growth Opportunities Act because it led to a loss of income for the states. That’s why it’s in the mediation process between the Bundestag and the state chamber. The Union only wants to agree to the law if the removal of agricultural diesel subsidies is reversed. The mediation committee meets on Wednesday evening.
Source: Stern
