The past few years have been very good for the construction industry: low interest rates, high demand, cheap materials. Nevertheless, the numerous associations for landlords, construction companies or real estate agents called for more support and less regulation and regulations. Always with the threat: Otherwise we won’t build any more. It was built anyway.

So there are certain doubts when these associations now demand the same thing – again and again. And it takes a while for them to reach the federal government. The housing construction summit will take place in the Federal Chancellery this Monday – and two associations, Haus und Grund and the umbrella association of the housing industry (GdW), are staying away. GdW President Axel Gedaschko says the federal government has “reacted too slowly, too late, too timidly for over two years to the situation that was rapidly deteriorating.”

A few weeks ago, Vonovia announced that it would not build 60,000 planned apartments. Vonovia boss Rolf Buch said they would “get everything ready up to building law” and “hope that building will soon be worthwhile and profitable again”.

This is the difference from previous years: While there were threats for a long time not to build any more, the companies are now actually gradually stopping. This is particularly evident in the numbers of building permits. They fell by a good 27 percent in the first half of 2023. But is building really no longer worth it?

In fact, conditions have changed greatly as a result of the Ukraine war and its economic consequences. Construction costs have risen sharply and the interest rate turnaround has made loans more expensive. Many private developers had to give up their dream of owning property. Housing market expert Christian Oberst from the employer-oriented German Economic Institute is therefore not surprised that developers who build condominiums have also had problems recently. In the current interest rate situation, demand for buying houses and apartments is simply declining.

“Actually, that’s exactly why it should be attractive for landlords to offer and build apartments,” he says. Because if fewer people buy living space, demand on the rental market will increase even more, meaning even higher rents should be possible. The rising construction costs could basically be covered in this way, but in some locations the tenants have long since reached their solvency. Even if rented new apartments are often exempt from regulation. “Today’s new buildings are tomorrow’s regulated inventory,” says Oberst.

However, he assumes that the main problem lies in the requirements for new construction. These are often very high in terms of energy efficiency, fire protection and parking space requirements, but also in terms of the proportion of social housing. So the costs continue to rise, even if you don’t want to take advantage of government funding. At the same time, it has become less in recent months.

The associations are now also reaching the federal government with their complaints. The energy efficiency requirements will not be further tightened next year and a program for private house construction will be expanded. In addition, the program for student and trainee dormitories is to be expanded.

There is no general answer as to whether building is still attractive for landlords, says Christian Oberst. Some landlords may now focus on dormitories, while others offer very expensive rental apartments. However, for a company like Vonovia, which rents out cheap apartments to the general public, the new building no longer seems to be profitable enough to meet the demands of shareholders. Otherwise it would continue to build – just like in previous years.

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