Real estate market in stranglehold: State plans massive regulations!

Real estate market in stranglehold: State plans massive regulations!

The challenges in the real estate market are becoming increasingly pressing. The new federal government in Germany has set its sights on the situation on the housing market. With a regulatory policy that controls around half of the country's economic output, the construction industry faces future problems. These are significantly influenced by over 20,000 building regulations, which unnecessarily slow down the planning and approval processes Tichy's insight reported.

In practice, the state of the real estate market is catastrophic. High construction costs arise from rising energy prices, minimum wages, a lack of materials and extensive bureaucratic requirements. The rent cap has been extended until 2029 and private landlords will be held more accountable in the future. This also includes the introduction of fines for violations of the current regulations. The new Federal Minister of Justice Stefanie Hubig is planning a political change in tenancy law and sees landlords as the main cause of the problems.

Construction volume and vacant apartments

During the Corona lockdowns, construction volume fell by 12%, leading to a drastic decline in building permits by almost 30%. At least 400,000 new homes are needed annually, but only around 252,000 homes were built in 2022. This results in a deficit of over 900,000 units. Politicians are criticized for using temporary frictions on the real estate market for their own purposes and not quickly creating solutions.

According to experts, a state withdrawal from the real estate market could result in more efficient market regulation. Critics believe that the new federal government's current approach is not enough to bring about a change in the regulatory landscape. Friedrich Merz is viewed by many analysts as incapable of initiating the necessary change.

Similar challenges in Switzerland

The situation in Switzerland reflects this problem. Finding accommodation in cities like Basel and Zug is also difficult, and strict regulations make it difficult to create new living space. In Basel, for example, a law was introduced that provides for rent controls for five years after renovations. However, this “real housing protection” has led to a drastic decline in newly built apartments: from 1,169 in 2022 to just 450 in 2024.

The rent cap votes in Zurich and Bern were classified by economists as damaging to the housing market as they could exacerbate the housing shortage and inhibit housing construction. There has been a rent cap in Geneva for years, which has led to a neglected housing stock and high rents. If all current initiatives in Switzerland are adopted, the number of regulated apartments could increase to half of the total stock Economiesuisse warns.

In summary, it can be said that comprehensive regulations in both Germany and Switzerland are currently not only reducing the supply, but are also making the search for appropriate living space considerably more difficult. The demands for deregulation and faster approval procedures are therefore becoming increasingly important.