The real estate giant Vonovia is stopping all new construction projects planned for 2023. The reason for this is the rising construction costs and interest rates. “We will not have any new construction projects starting this year. Inflation and interest rates have risen enormously and we cannot close our eyes to that,” said Vonovia CEO Daniel Riedl West German General Newspaper. Plans in Berlin and Dresden are particularly affected.
“For properties that we were previously able to offer for twelve euros per square meter without rent, we would now have to go towards 20 euros in order to recover our costs of 5,000 euros per square meter,” said Riedl. These rents are “completely unrealistic” in large parts of Germany. In order to cover the nationwide demand for 700,000 apartments, rents of eight or nine euros are also required. The federal government must intervene, provide clear funding guidelines and promote the digitization of building applications.
In November, Vonovia boss Rolf Buch had already reduced the investments for the new building to around 350 million euros compared to the previous year and referred to the increased costs. The general manager of the main association of the German construction industry, Tim-Oliver Müller, had recently warned that the urgently needed new housing construction would be slowed down by the cost explosion. “Many projects were initially put on hold or even cancelled,” he said.
For Federal Building Minister Klara Geywitz (SPD), the decision comes at a bad time. Actually, together with the federal government, she had announced that she would build 400,000 new apartments per year, 100,000 of them as social housing. Because in Germany there is a lack of hundreds of thousands of apartments, especially larger and affordable ones in the metropolitan areas. Yet far too little is being built.
Nothing will come of the federal government’s new construction target
In order to achieve the goal, a separate Ministry of Construction was created with a budget worth billions. But as early as mid-January, Geywitz also admitted that the new building target would not work. That was not the case in the past year – and it will probably be even less so in the year that has just begun. “I do not assume that the number of 400,000 apartments can be reached in 2022 and 2023,” she told the Internet portal Web.de in an interview. However, the goal remains “to get to this number in 2024 and 2025”.
In the real estate industry, the belief that something will change quickly is now fading. And Vonovia’s construction freeze throws the plans back again. An internal survey by the Federal Association of Independent Real Estate and Housing Companies recently illustrated how gloomy the mood has become. Instead of the planned around 150,000 new apartments, the medium-sized member companies probably only want to tackle around 65,000 this year, and in 2024 the number will probably drop to a good 50,000.