Status: 01/11/2023 11:21 am
Inflation, rising interest rates and delivery bottlenecks have halted the construction boom in Germany. This has dramatic consequences, especially for the housing market. According to a DIW study, construction activity will continue to decline this year.
There is less construction in Germany: Last year, inflation-adjusted construction volume fell for the first time in many years, according to the German Institute for Economic Research (DIW). Residential construction in particular was disproportionately affected by the declines.
The DIW experts do not expect an upswing in the industry until next year: “Adjusted for inflation, the construction volume will probably still be negative this year and will only be positive again from 2024, but even then residential construction, especially new construction, should contribute to the overall development lag behind,” says study author Martin Gornig.
Investors are holding back
The economists cited high inflation and ongoing supply bottlenecks as reasons. The construction industry is struggling with strong price increases. According to the Federal Statistical Office, the prices for the new construction of conventionally manufactured residential buildings rose by 16.9 percent in November compared to the same month last year. The experts expect poorer financing conditions, political uncertainty and more cautious investors in the current year and next.
The rising prices also ensured that the number of orders received by companies fell significantly last year. This is also confirmed by current figures from the Federal Statistical Office, according to which incoming orders in the construction industry fell in the first ten months of 2022, adjusted for calendar and price changes.
The government’s goal is missed
And a trend reversal is not in sight for the time being: the federal government originally set itself the goal of building 400,000 new apartments annually. However, the Central Association of the German Construction Industry expects that only 245,000 apartments will be completed this year. That would be another 12 percent less than forecast for 2022. The target of the federal government would again be clearly missed.
The DIW expert Gornig is therefore calling for a change in strategy from politicians: Although the federal government has already decided on measures to promote tax incentives for housing construction, it must focus more on densification in existing buildings in order to create affordable new living space, especially in metropolitan areas. In addition, the companies would have to be promoted so that they can build up capacities. In this way, bottlenecks in the supply and thus also price increases can be counteracted.
Rents in Germany continue to rise
Because living space in Germany’s big cities is scarce – and is becoming more and more expensive, as a new study by the Immowelt platform shows: In 75 of 79 cities, rents have increased from 2021 to 2022 – in some cases the asking rents have risen by 13 percent.
Rental apartments have not only become more expensive in the megacities, but also in other large cities such as Stuttgart. Rents there rose by three percent to around EUR 13.90 per square meter. The Swabian metropolis is now the second most expensive city in Germany after Munich and has overtaken Frankfurt am Main.