GERMANY is facing a housing construction crisis that could last for years unless its conditions improve fundamentally, according to German economists and construction experts cited by the German news agency dpa.

The rapid rise in construction costs has made privately financed housing construction more difficult, and for many entrepreneurs it has become unprofitable. To cover these costs, the rent for a new apartment per square meter would have to amount to 18 euros, estimates the Working Group for Contemporary Construction (ARGE), based in Kiel.

Housing construction in Germany is divided into social housing, subsidized by the state, and privately financed housing, which is supposed to be self-sustaining.

According to ARGE, the average construction cost per square meter of living space – including land costs – currently amounts to around 5,200 euros. “Building is simply too expensive,” said Ludwig Dorffmeister, a construction and real estate expert from Munich's Ifo Institute for Economic Research.

“In May, the prices for building conventional new apartments were 36 percent higher than at the beginning of summer 2020.”

Rising interest rates are also hitting private construction and housing companies. “In many cases they are postponing projects because the required rent would financially overburden future tenants,” said Dorffmeister.

Meanwhile, since 2022 the government has been seriously limiting subsidies for new construction, the dpa agency writes. “Despite the expected efforts of everyone involved, I do not expect a reversal of the trend, but rather further serious losses on the market,” the expert said.

Source: index.hr