“In the rental sector many project developers are complaining that new-build residential projects would not be feasible even if they were given the land as a gift.”
The German construction sector has been in a downturn since 2021 and the outlook remains bleak. Bucking the European trend, things went exceptionally well in 2020. But then the various consequences of the pandemic and later the Ukraine conflict began to make themselves felt. The turnaround in interest rates, the sharp rise in construction prices and the loss of purchasing power among private households not only slowed down the renovation sector, but also hit new residential construction in particular with full force.
At the same time, state subsidies for new buildings were cut back considerably. In the rental sector, for example, many project developers are complaining that new-build residential projects would not be feasible even if they were given the land as a gift. The reason: there would be hardly any takers for the required rents of more than 15 euros per square metre.
Furthermore, not only the construction sector, but also the entire economy has been groaning for years about the government’s increasing regulatory frenzy. In times of pronounced economic weakness, this further inhibits the propensity to invest, which is already subdued due to high energy prices and corporate taxes. In addition, the judgement of the Federal Constitutional Court announced in mid-November 2023 on how to deal with state loan authorisations significantly restricts the financial scope of the federal government. The funds of most shadow budgets are now no longer available. These funds should have also been used in part to finance the intensive, multi-year modernisation of the supra-regional rail network scheduled until 2030, which has begun in 2024. Although railway construction is one of the few bright spots in the construction sector, there is currently only financial planning security for this and next year. In the end, politicians must realise that this is the last chance to ever get the ailing rail network back on track.
