Construction prices are exploding: there is a threat of a housing shortage in our city!

Construction prices are exploding: there is a threat of a housing shortage in our city!

The situation on the housing market in Germany has worsened in recent years. The main reasons are the sharp rise in construction and financing costs, which, in combination with an acute housing shortage and low levels of new construction activity, are driving up the prices for houses and apartments. Experts warn that a planned infrastructure package from the federal government could possibly make the situation even worse by leaving it unclear whether the billions promised will actually flow into housing construction or whether they will simply cause construction prices to rise further [Capital] reports that...

The high demand for craftsmen and construction site materials could further slow down new construction. Capacity utilization in construction is currently only 70 percent - a value that is low compared to the boom years before 2021. However, as [bpb] reports, the causes of these problems are complex. A lack of new buildings is countered by a constant increase in the need for housing, particularly due to high immigration numbers in recent years. According to a study commissioned by the “Social Living” association, there is currently a shortage of around 550,000 apartments across Germany.

Rising rental prices and vacancies

At the same time, many properties are vacant. The 2022 census recorded 1.9 million apartments that were empty, which corresponds to a vacancy rate of 4.3 percent. Particular attention is paid to large cities, where one in three empty apartments remains unused for more than 12 months. Compared to rural areas, vacancy rates in cities are typically significantly lower. In Hamburg and Berlin, for example, it can be seen that a significant number of apartments remain unused [bpb] reports that...

Although there is an estimated need for 372,000 new apartments annually from 2021 to 2025, actual construction activity has been stagnating in recent years at around 294,400 apartments in 2023. Apartment permits rocked to just under 176,000 in the first ten months of 2024, down 42,600 from the previous year. The government has set itself the goal of creating 400,000 new apartments annually, but due to rising interest rates, high construction costs and complex approval processes, only 150,000 to 200,000 apartments are expected to be completed by 2025 [Capital] reports that...

Necessary measures and demands

To remedy the structural misery, experts suggest a number of measures. These include increasing state subsidies for owner-occupiers, expanding tax depreciation options and reducing property transfer tax. The provision of subordinated loans for buyers with little equity is also required. There is a particularly urgent need to lower requirements for energy renovations in order to encourage homeowners to renovate. The existing unclear funding landscape is another obstacle that needs to be overcome [bpb] reports that….

In summary, the housing market is still characterized by an imbalance between supply and demand. Although an upturn in existing business is expected, private new construction could stagnate. With increasing rent burdens and a constant rise in rents, the issue of living space remains an urgent social problem in Germany.