Germany Lags Behind in Residential Building Construction - Germany's Real Estate Market Experiences Downturn
Germany's housing construction sector is currently in a slump, and things aren't looking up in the near future. According to the European construction research group Euroconstruct, completion figures for new apartments will shrink annually until 2027. This dreary outlook paints a stark contrast for the country, ranking it last in Europe for housing construction growth with an estimated 44% drop from 2023 to 2027. Austria follows closely behind with a 37.3% decline, but none of Western Europe's major economies are expected to be as impacted as Germany by 2027.
What's causing this construction crisis in Germany? High construction costs are the primary culprit, as reported by the Ifo construction expert Ludwig Dorffmeister. Even with a smaller population, the UK could potentially overtake Germany's housing construction output by 2027, with an estimated 210,000 new apartments, according to Euroconstruct's forecast. The German Construction Industry Association considered this outlook alarming.
The extreme pessimism towards Germany's housing construction market stems from several factors. For instance, stagnant new building projects are largely due to legislative and regulatory hurdles, requiring high technical standards and burdening construction activities with bureaucratic red tape.
In contrast, Germany's neighbors are investing in renewable energy and energy-efficient measures, which indirectly support housing construction. This undertaking of refurbishment over new construction projects flows from a focus on upgrading existing infrastructure rather than building new.
Unfortunately, the German economy is experiencing a stagnation, with private consumption and investments declining. Adding to the woes is the economic uncertainty brought about by the war in Ukraine and the subsequent energy crisis, further impeding investment in new housing projects.
Euroconstruct's forecast sheds light on the performance of other European countries. Italy exhibits growth in solar power installations, while Austria experienced a substantial increase in installations with a 114% growth rate in 2023. In the case of Spain, solar power deployment has been strong, along with targeted funding and subsidies, although construction permit processes and household spending have slowed down the market a tad.
Research indicates that while Germany's housing construction growth is expected to lag behind other European countries, the country faces unique challenges resulting from legislative, regulatory obstacles, and economic uncertainty. While other European nations invest in renewable energy and support construction projects, Germany's housing construction market struggles amidst new building project stagnations and economic hurdles.
The European Union expressed concern over Germany's housing construction crisis, as the country's projected growth rate in this sector is significantly lower than its neighbors. Despite having a smaller population, the UK is predicted to surpass Germany's housing construction output by 2027.
