Gloomy prospects for the construction industry: “The situation is dramatic”


As of: September 25, 2023 1:45 p.m

The housing construction summit showed that the crisis is complex. Uncertainty about the heating rules has contributed to the fact that it is already clear that construction will probably also be in ruins in 2024.

Hans-Jürgen Lenz walks through Hans-Böckler-Straße in the Oggersheim district of Ludwigshafen. On one side, one residential complex is lined up after the other – a classic 1960s building, simple, straightforward and solid even after decades. Lenz works for the municipal housing company GAG and looks after the company’s inventory.

Lenz wants to look at an apartment that has just been renovated. He opens the door and looks at the heating system with a worried look. “If the thing breaks in the near future, what then?” asks the civil engineer. The apartment has two individual gas stoves and a gas water heater.

“Economically not justifiable”

According to the federal government’s new Building Energy Act (GEG), only certain gas heaters will be allowed to be installed here from next year. And conversion work would be necessary to install heat pumps. “The apartments in this building are heated with gas. If we were to install a heat pump, we would initially have an energy problem.”

First of all, a lot of money would have to be invested in energy-efficient renovation. “It starts with the house connection for electricity, which would have to be significantly strengthened. Then we would have to insulate the roof, the facade and the basement.” The individual apartments would then be given new pipes, radiators and windows with triple glazing. Lenz expects around 2,500 euros per square meter. “This is not economically justifiable – neither for the tenant nor for us as a company.”

Too much for tenants, too little for landlords

Tenants currently pay 5.60 euros per square meter for the apartment. The GAG ​​is not allowed to increase the rent arbitrarily, even in the event of energy-efficient renovation. Lenz explains the legal situation: “We are allowed to pass on eight percent of the costs to the tenant. If the tenant pays less than seven euros in rent, we are allowed to increase a maximum of two euros per square meter because of the cap. That’s a lot of money for the tenant. But it covers it Our conversion costs don’t come close either.”

And at what rent level would the expenses for GAG be back in the coffers? Lenz shakes his head: “Then we would get 13 to 14 euros in rent. Who is going to pay that?” GAG manages around 13,000 apartments in Ludwigshafen. About a third of them are at the same level as on Hans-Böckler-Straße.

New building with the heat pump

Just outside Ludwigshafen, GAG is currently building a larger residential complex with 146 apartments on Erfurter Ring. Excavators are moving around the construction site, cranes are turning, houses are being scaffolded. Insulation panels are in front of it. Klaus Schäffner heads the planning and construction department at GAG.

He goes into a basement and points to several heat pumps. “This is a facility that meets the most modern standards. With this new building we can play an active role in reducing CO2. We’re not very proud of it.” This is where the heat pump concept works: in new buildings.

Canceled funding causes costs to rise

The construction project started a good year ago and costs a total of 41 million euros. In addition to a low-interest loan, the state development bank Kreditanstalt für Wiederaufbau (KfW) injected 3.6 million euros. The old funding program KF55 has now been canceled. Without the funding, GAG would not have been able to build – the market situation was already so tense back then.

“The current conditions make everything much more difficult than it was two years ago,” said Schäffner. “The demands on energy-efficient construction are constantly increasing. Economic efficiency is becoming increasingly difficult to achieve. Overall, building is now practically impossible.”

In the new residential complex, the apartments will be offered for a price per square meter of 6.40 euros. However, the facility will not be able to cushion the pressure from the real estate market, because the demand for living space in Ludwigshafen has quadrupled since 2016, as Schäffner explains. But doesn’t the federal government’s new Building Energy Act provide clarity? “No,” answers Schäffner. “This is actually a nail in the coffin for the new building.”

More and more specifications, fewer and fewer construction projects

It’s not just new construction that’s seeing a dramatic drop; Demand for heat pumps has also collapsed. In the first eight months of this year, applications for state funding fell by more than 70 percent compared to the same period last year, explains the Federal Heat Pump Association.

The heating debate of the past few months and the uncertainty about the funding rules that will apply from 2024 are responsible. At the same time, according to a study by the consulting firm PwC, the number of new gas heating systems rose by almost 30 percent in the first half of the year, and sales of new oil boilers more than doubled.

Tim-Oliver Müller, managing director of the German construction industry, is not surprised by the overall development. “Markets need reliability. Only then will investors invest in the market. What we experienced in the last apartments with the GEG amendment did not contribute to there being more security on the market.” Müller draws a bitter overall assessment: “The situation is dramatic. We have declining orders received. We have many companies that have not received any new orders since the beginning of the year.”

New ones quickly Funding programs?

Faced with a slump in demand, associations have called for efforts to boost sales of heat pumps. If the federal government does not improve funding soon, the target of 500,000 heat pumps will be clearly missed. The leading associations of the heating industry BDH and the plumbing, heating and air conditioning trade ZVSHK warned about this a few days ago on the occasion of the “Heat Pump Summit” hosted by Federal Minister of Economics Robert Habeck.

The associations are demanding that the new funding framework for heating replacements must come as quickly as possible. The electricity used in heat pumps is still too high compared to the price of gas. Consumer advocates explained that the government must ensure “sufficient financial support so that low-income households can also cover the investment costs for a heat pump.”

Skilled workers are lacking

But there is also a lack of skilled workers in the craft sector. In addition, intensive and lengthy follow-up training for existing employees is often necessary. Many small and medium-sized companies have so far been geared towards gas and oil heating, according to the spokesman for the Central Association for Sanitary, Heating and Air Conditioning (SHK). There is currently a shortage of around 60,000 plumbing and heating installers in Germany.

And what is the outlook? “The situation for next year is just as bad as this year. We cannot build anything that is not ordered or approved now,” explains Managing Director Müller. “We assume that next year we will slip well below 250,000 completed apartments – perhaps even below the 200,000 mark. It is toxic if we do not know how buildings will ultimately be equipped with thermal technology.” The federal government is currently sticking to its goal of 400,000 new apartments per year.

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