Germany: strong decline in new housing construction

According to a study published by the ifo Institute in Munich, a number of European countries will build fewer residential houses in the coming years. According to the report, Germany expects a 32% drop in new housing construction between 2023 and 2025. The level of decline will only be exceeded in Sweden (39%) and Denmark (33%), according to a study by independent construction market forecasting network Euroconstruct.

In Germany, the study predicts 200,000 homes will be completed by 2025, up from 295,000 last year. This could lead to an increase in housing prices. However, there are also countries where residential construction is expected to increase.

The reasons for the decline in new residential construction are the recent jump in interest rates, rising construction costs and uncertainty among developers and buyers. Despite prices falling slightly after years of rising prices, many potential homeowners in Europe cannot afford to buy a home. There is a shortage of affordable housing in many German and European cities.

Data released last week by the EU showed prices fell for the second consecutive quarter. All told, the index is down 2.9% in six months, discouraging investment in new housing. "The general uncertainty about the medium-term dynamics of real estate prices is causing widespread deterrence among developers and potential buyers," said Ludwig Dorfmeister, a construction expert at the ifo institute.

The German Macroeconomic Institute (IMK) has proposed using more public funds to build affordable housing and fill the gaps left by private construction companies' reduced investment due to rising costs.