Construction industry fears massive economic downturn

Construction of a single family house

The price increases are enormous.

(Photo: IMAGO/MiS)

Berlin The construction industry is threatened with stagnation and a collapse in orders. While the industry was still a pillar of the German economy during the Corona pandemic, the enormous increase in energy, material and construction prices and rising interest rates are now causing new projects, especially in residential construction, to be postponed or cancelled.

Before the building ministers’ conference of the federal states with Federal Building Minister Klara Geywitz (SPD) this Friday in Berlin, the construction industry, building trade, trade and building materials industry are urging the state to act.

A position paper by the associations, which is available to the Handelsblatt, says: “In order to avoid a massive economic downturn and to keep the urgently needed specialists in the industry, the emerging decline in new construction activity must be cushioned as best as possible.”

What is meant by this is, above all, state subsidies for new construction. To the annoyance of the industry, the concept announced by the Federal Ministry of Building for how the construction of affordable housing should be funded in the future is still pending.

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“The Federal Government has spoken of a realignment of the funding framework for the beginning of 2023 – but so far we have not had anything concrete, no key data, no framework – nothing,” said Tim-Oliver Müller, Managing Director of the Main Association of the German Construction Industry.

Construction costs increase by 30,000 euros

Felix Pakleppa, general manager of the Central Association of the German Construction Industry (ZDB), said that with the tightened funding conditions in the spring, the construction costs for a “normal single-family house” had increased by around 30,000 euros. It must be “urgently reworked”. He also called for a special depreciation in rental housing.

>> Also read: Fewer permits for residential construction – experts see “precarious situation”

According to the Federal Ministry of Building, the revised funding concept should take effect from the second quarter of 2023. The industry, on the other hand, had assumed new conditions from January. Then the new construction subsidy is transferred from the Federal Ministry of Economics to the Ministry of Construction. Funding for the energetic refurbishment of the housing stock remains with Robert Habeck’s (Greens) Ministry for Economic Affairs and Climate Protection.

The Ministry of Construction has so far had one billion euros available for new building subsidies. Of this, 650 million euros are intended for the construction of rental apartments, 350 million euros for the promotion of home ownership. As recently as September, a spokeswoman said that the concept for new construction funding was currently being finalized. We would like to comment on this in the autumn.


Nicole Razavi, Baden-Württemberg Minister for Housing and Federal Minister for Building, and Klara Geywitz (right) visiting the “Stuttgart21” construction site.

(Photo: dpa)

The result paper of the “Alliance for Affordable Housing”, which was presented by Geywitz and Federal Chancellor Olaf Scholz (SPD) on October 12, states that the “establishment of an independent new building subsidy” should be implemented by the federal government by January 1st, 2023. Representatives from politics, business and society had drawn up an investment and innovation offensive with 187 points, which was intended to speed up construction projects.

>> Read here: KfW-New construction funding: house builders can still access more than 100 million eurosThere should not be a funding chaos like in the spring. According to information from the Handelsblatt, the previous one should continue until a new concept takes hold. In the spring, Habeck had to stop state support twice because the funds ran out.

After that, the conditions were tightened. Since April 21st, money has only flowed for new buildings according to the efficiency house standard 40 (EH40) plus a quality seal for sustainable building.

EH40 means that a building only uses 40 percent of the energy that a legally defined standard house requires. The smaller the key figure, the lower the energy requirement of the property. Up until last year, EH55 buildings were still being funded. That was deleted to the annoyance of the housing industry.

The state seal of quality QNG from the Ministry of Construction is linked to requirements for the ecological quality of buildings, such as the use of low-emission building materials.

Economy calls for more attractive subsidy rates and a special write-off

Among other things, the new funding is intended to provide for a stronger focus on greenhouse gas emissions throughout the life cycle of the building. The traffic light had agreed in the coalition agreement.

“The linking of sustainable building with the promotion of new construction is an opportunity for the establishment of sustainability aspects in planning processes,” says the position paper of the construction industry, construction trade, crafts and building materials industry. But: “It should be stimulated with significantly more attractive funding rates.”

The planned increase in straight-line depreciation in rental housing construction from mid-2023 is welcomed, as is the gradual expansion of social housing subsidies in the coming years. “However, the medium ramp-up in social housing promotion should be faster and must be flanked accordingly by state funds,” it says. In regions with particularly tight housing markets, the associations insist on additional tax incentives in the form of special depreciation.

The Federal Association of Independent Real Estate and Housing Companies (BFW) also warned of a “complete standstill” in new housing construction and, with a view to the meeting on Friday, called on the federal and state governments to work through the alliance’s decisions.

BFW President Dirk Salewski said: “Project developers and builders are not starting any new projects because it has become unaffordable for consumers, but also completely uneconomical for companies.”

More: Where there is still affordable real estate around the capital

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