Builders have to dig deeper and deeper into their pockets. Housing construction prices are skyrocketing , with the biggest increase since about 10 years ago. In today’s blog post, we show the reasons for the increase in construction prices in Germany.
Rising construction costs not only affect the new building
The increase in residential construction prices , at 4.1% over the previous year , is stronger than it has been for more than 10 years. But the rising construction costs not only affect the new construction, but also maintenance measures and modernization measures are affected. This cost explosion ultimately affects builders, investors, tenants or homeowners who want to modernize their property .
What are the reasons for the increase in construction prices?
One reason is the lack of young talent in the trades as well as a shortage of personnel in the construction industry, which causes construction prices to skyrocket. Due to the high demand for construction work, the capacity bottlenecks of the construction companies and craft businesses are increasing at the same time. At the same time there are more and more orders due to the construction boom in Germany, so that craftsmen can now choose their customers and not vice versa. From the roofing company to the construction company – the order books of craft companies and construction companies on average reach for more than four months of full employment, according to the Association of the German Construction Industry
Even the increased technical requirements ensure a price increase, this begins already in the shell construction phase. According to the Federal Association of German housing and real estate companies, the number of building codes in the areas
- noise protection
- Fire protection
- Energy Conservation Act
since 1990 more than quadrupled. Above all in the area of the energy saving regulation there are higher requirements since 2016, for example with the insulation thickness or the window glazing, which also increase the labor costs and material costs.
However, construction prices are not the sole price driver on the market. Another factor is the increased land costs . According to the Federal Statistical Office, the prices for building land in Germany have increased by more than half since 2010 on average.
Construction boom: now follows the U-turn?
The sharp increase in construction costs also means that fewer and fewer Germans can or want to buy residential property themselves. This could mean a turnabout of the construction boom in Germany for the next few years. The construction industry is already working at the limits of its capacities, and the building land in sought-after locations is becoming increasingly scarce. If one looks at the approved and actually completed apartments and juxtaposes them, a clear discrepancy is evident and once again illustrates the effects of the cost spiral on the German real estate market .
All this indicates that the growth in new housing construction could lose momentum in the future. Whether measures such as the Big Lending can help here remains to be seen.