Real estate experts' report - sobering

The spring report by the property experts is sobering. No amount of good humour can hide the effects of inflation, high interest rates and the resulting lack of construction activity. The property sector is groaning under the poor framework conditions.

The report states that a dramatic slump in housing completions is foreseeable, with a shortfall of 720,000 flats by 2025 and as many as 830,000 by 2027. At the same time, residential construction is experiencing a wave of cancellations - 20.7 percent of companies have halted projects. Industry players feel "gagged" by costs and regulations. "Anyone who builds housing in this situation will go bankrupt - 37 per cent of state-imposed taxes on housing are no longer affordable," explains ZIA President Dr Andreas Mattner.

Prof. Dr Lars Feld, property expert and member of the Scientific Advisory Board of the Federal Ministry of Finance, describes the basic problem as follows: "Due to increased construction costs and financing difficulties triggered by higher interest rates, many construction projects are no longer profitable and are being cancelled." Prof. Feld analyses the overall economic situation in his report. His assessment: the wave of cancellations could "continue, as the general conditions for construction investments are likely to remain unfavourable for the time being".

However, the spring report also shows that, despite geopolitical risks and economic policy uncertainties, an overall economic recovery is possible and that the property industry can participate in this.

This year, the German government is making one billion euros available for the "Climate-friendly new construction in the low-energy house segment" programme. This is a welcome step, but it should go even further: a KfW programme that lowers market interest rates to two percent would boost housing construction. A temporary waiver of land transfer tax would also be a relief.

Conclusion for private property buyers: Once the bottom has been reached, it pays to act anti-cyclically. As construction interest rates continue to fall and property prices drop, buying a property will become attractive again.

(Photo: © Leonhard Niederwimmer, Pixabay)