New Apartment Construction in Germany Faces Significant Decline Amidst Housing Crisis
The Spring Report reveals an anticipated drop in new housing units, falling short of government targets as demand continues to outpace supply.
The number of new apartments in Germany is projected to see a significant decline in 2024, prompting concerns among real estate experts regarding the ongoing housing crisis.
The latest Spring Report published by a consortium of real estate experts known as the 'Immobilienweisen' estimates that only 230,000 new housing units will be constructed this year.
This figure represents a sharp decrease from the 294,000 units completed in 2023 and 260,000 units in the previous year.
The anticipated construction output is notably below the German government's target of building 400,000 new apartments annually.
The Immobilienweisen categorized the current housing market situation as a 'deep-seated crisis,' highlighting the widening gap between the substantial demand for housing and the lagging pace of construction activities.
Iris Schöberl, President of the Central Real Estate Committee (ZIA), emphasized the urgent need for a political 'reboot' to effectively tackle the challenges facing the real estate sector.
The report further illustrates that the shortage of housing is intensifying, particularly in major cities, which is contributing to the continuous rise in rents and property prices.
Experts predict that rental costs, especially in desirable urban areas, are likely to keep increasing.
Contributing factors to this trend include a growing preference for renting over purchasing as interest rates rise, thereby enhancing the demand for rental accommodations.
In addition, escalating construction costs and high interest rates are expected to restrict new housing supply, further influencing rental availability.
The report cautions that stagnating or declining construction activity may perpetuate elevated property prices, with potential increases anticipated as the economic environment stabilizes in light of previous fluctuations associated with rising financing costs.
To address these pressing issues, the expert group has proposed an extensive array of measures aimed at revitalizing the housing market.
Their recommendations include accelerating planning and approval processes through digital solutions to cut down bureaucratic delays, increasing staffing in building authorities to handle applications more efficiently, and enhancing land activation by municipalities.
The proposals also encompass the standardization of construction processes, lowering property acquisition taxes, and relaxing construction regulations to spur development.
Schöberl noted that the real estate sector, which accounts for nearly 20 percent of Germany’s gross value added, has the potential to serve as a key economic driver if adequately supported and allowed to operate efficiently.
The latest Spring Report published by a consortium of real estate experts known as the 'Immobilienweisen' estimates that only 230,000 new housing units will be constructed this year.
This figure represents a sharp decrease from the 294,000 units completed in 2023 and 260,000 units in the previous year.
The anticipated construction output is notably below the German government's target of building 400,000 new apartments annually.
The Immobilienweisen categorized the current housing market situation as a 'deep-seated crisis,' highlighting the widening gap between the substantial demand for housing and the lagging pace of construction activities.
Iris Schöberl, President of the Central Real Estate Committee (ZIA), emphasized the urgent need for a political 'reboot' to effectively tackle the challenges facing the real estate sector.
The report further illustrates that the shortage of housing is intensifying, particularly in major cities, which is contributing to the continuous rise in rents and property prices.
Experts predict that rental costs, especially in desirable urban areas, are likely to keep increasing.
Contributing factors to this trend include a growing preference for renting over purchasing as interest rates rise, thereby enhancing the demand for rental accommodations.
In addition, escalating construction costs and high interest rates are expected to restrict new housing supply, further influencing rental availability.
The report cautions that stagnating or declining construction activity may perpetuate elevated property prices, with potential increases anticipated as the economic environment stabilizes in light of previous fluctuations associated with rising financing costs.
To address these pressing issues, the expert group has proposed an extensive array of measures aimed at revitalizing the housing market.
Their recommendations include accelerating planning and approval processes through digital solutions to cut down bureaucratic delays, increasing staffing in building authorities to handle applications more efficiently, and enhancing land activation by municipalities.
The proposals also encompass the standardization of construction processes, lowering property acquisition taxes, and relaxing construction regulations to spur development.
Schöberl noted that the real estate sector, which accounts for nearly 20 percent of Germany’s gross value added, has the potential to serve as a key economic driver if adequately supported and allowed to operate efficiently.
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