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    HomeBusinessReal estate wise: crisis in housing construction deeper than expected

    Real estate wise: crisis in housing construction deeper than expected

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    “Whoever builds goes bankrupt”
    Real estate wise: crisis in housing construction deeper than expected

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    The traffic light wanted to build 400,000 new apartments per year – now it could only be 150,000. This gloomy situation is depicted in a report by real estate experts. Due to high interest rates, all projects became “suddenly uneconomical”.

    According to forecasts by the so-called real estate experts, the federal government will miss its housing construction target even more significantly in the future. “The crisis is deeper than the building completion and building permit figures show so far,” says the spring report. Housing construction is still based on projects that were started before the significant interest rate increases. Given the collapse in approval numbers and taking construction times into account, completions are likely to fall to 150,000 apartments per year. The federal government's target of 400,000 is now a long way off.

    According to estimates, in 2023 the mark was again significantly missed at around 270,000. “With the current levels of interest rates, building land prices, construction costs and rents, building new apartments is not worthwhile,” warn the experts. The Central Real Estate Committee (ZIA), which handed over the report to Federal Construction Minister Klara Geywitz, warns of a social debacle. There was already a shortage of more than 600,000 apartments in Germany this year. This number will rise to 720,000 by next year and even to 830,000 by 2027. “The experts’ analysis is not just a wake-up call, but in some respects a real siren alarm,” said ZIA President Andreas Mattner.

    The main reason for the development is the interest rates that have risen since spring 2022. This means that all residential construction projects have almost suddenly become uneconomical, said real estate expert Harald Simons. The result is a virtual halt in housing construction. “New residential construction is in a deep crisis,” said the expert. According to the ZIA, a “black zero” for new residential developments is only achieved at an average rent of 21 euros per square meter. “That is not possible,” said ZIA President Mattner. “So whoever builds goes bankrupt.”

    In order to do something about the misery, the ZIA is proposing a program from the state development bank KfW that would reduce market interest rates to two percent. With a funding amount of three billion euros, this would bring about 100,000 additional apartments. A temporary waiver of real estate transfer tax or municipal levies on housing construction would also be “super turbo,” said Mattner. The association also considers the tax incentives through declining depreciation desired by the Federal Government and Bundestag to be indispensable. This is part of the so-called Growth Opportunities Act, which is met with resistance in the Federal Council.

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