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Germany is facing a housing construction crisis that will last for years unless general conditions are fundamentally improved, according to economists and industry experts.
The outlook reflects a rapid rise in construction costs that is making privately financed housing construction unprofitable for many developers.
To recoup the costs, the rent per square metre for a new flat would currently have to be around €18, estimates the Kiel-based Working Group for Contemporary Building.
Residential construction in Germany is split into social housing subsidized by the state, and privately financed housing, which is supposed to be self-supporting.
According to the ARGE, the average nationwide cost of building 1 square metre of living space - including land costs - is currently around €5,200.
‘Building is simply too expensive,’ said Ludwig Dorffmeister, construction and real estate expert at Munich’s ifo Institute for Economic Research. ‘In May, construction prices for conventional new housing were 36% higher than in early summer 2020.’
Rising real estate interest rates are also hitting private builders and housing companies. ‘In many cases, they are postponing projects because the rent that would be required for [properties] would financially overburden the future residents,’ said Dorffmeister.
Meanwhile, the government has severely restricted its subsidies for new construction since 2022.
‘Despite the expected adjustment efforts of all those involved, I do not expect a trend reversal, but rather further severe market losses,’ said the expert.
source: dpa
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