KfW new construction funding is delayed – economy

Building a house used to be easier. Rapidly increasing interest on loans and construction costs, plus the prospect of falling real estate prices, in general: the uncertainty. And the federal government is now tightening it up. Because the new construction funding via the state bank KfW cannot start in January as planned, but at the earliest in the second quarter. This was confirmed by a spokeswoman for the responsible Federal Ministry of Building, first had the FAZ reported about it.

The Ministry of Construction says that strict standards for funding would also be required in the new system: only KfW 40 new buildings should receive low-interest loans, the conditions would be adapted to the so-called Quality Seal Sustainable Building (QNG) tied. And until the new money flows according to the new rules, the old, significantly reduced funding should continue.

Nevertheless, many builders and real estate buyers are likely to be unsettled again. Last January, the Federal Ministry of Economics suddenly stopped all applications for the expiring funding program for the so-called Efficiency House 55, better known as the KfW 55 standard. The rush for the subsidies and repayment grants was so great that the money ran out prematurely. Shortly thereafter, another multi-billion dollar extension was decided and, as a result, stricter requirements for funding. The follow-up program for new KfW 40 houses was then largely over in April after just three hours. Since then, the new building subsidy has been running in a quasi-emergency mode.

Prices could fall, interest rates should continue to rise

Then in the summer, Economics Minister Robert Habeck (Greens), Building Minister Klara Geywitz (SPD) and Finance Minister Christian Lindner (FDP) presented how they wanted to provide funding from 2023: From the new year onwards, only the smallest part of the funds should flow into new construction funding, Instead, the focus should be on energy-saving and thus climate-friendly renovations in existing buildings. The Ministry of Economics wanted to make a total of 16.9 billion euros available for this. For new buildings, on the other hand, only a good one billion euros should be spent per year, although this is distributed by the Ministry of Construction. This change of responsibility, together with the high burden on KfW during the crisis, is now also blamed for the delay.

In any case, many builders and buyers had recently decided to wait and see, regardless of whether they were professionals or private households. The amount of new real estate loans issued fell drastically, as did the number of new building permits, especially for single and two-family houses. The construction companies are already feeling the effects: while old orders are increasingly being postponed or cancelled, fewer and fewer new ones are coming in. In the first nine months of this year, incoming orders fell by 7.3 percent, adjusted for calendar and price changes, as reported by the Federal Statistical Office on Friday.

And the reluctance, it could well be worth it. Because the new year could bring falling prices, at least on the real estate market: houses and apartments could become cheaper on average by four to six percent in the coming year, estimates the cooperative DZ Bank. However, it is quite possible that interest rates will continue to rise and financing will become even more expensive.

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