New residential construction in Germany on the slide: Ifo forecast expects 40% decline by 2026

The Munich-based Ifo Institute is forecasting a dramatic decline in new residential construction in Germany. By 2026, the number of completed apartments could fall to just 175,000, which corresponds to a decline of around 40% compared to the almost 300,000 apartments in 2022. This worrying trend is also evident across Europe. According to the Euroconstruct research network, the number of newly built apartments in Western Europe could fall from 1.5 million to 1.2 million.

Ludwig Dorffmeister, an expert at the Ifo Institute, explains that the high construction costs are significantly hampering building activity in Germany. Despite a stabilization of interest rates, housing construction remains expensive, leading to a slump in building applications. In May 2024, only 17,800 building applications were approved - a drop of 44% compared to 2022. Axel Gedaschko, President of the GdW, speaks of a “tragedy” in housing construction and criticizes the lack of political action. The Cologne Institute for Economic Research (IW) also sees a continued high demand for new apartments in the coming years, which, however, cannot be met by far.

New application groups for federal funding for efficient buildings from August 27, 2024

The reformed federal subsidy for efficient buildings (BEG), which supports the replacement of fossil fuel heating systems with climate-friendly alternatives, has been in force since January 1, 2024. From August 27, 2024, landlords of single-family homes and apartment owners will also be able to submit applications for measures on individual properties. This marks the third phase of the staggered funding start, after which private individuals and condominium owners' associations have already been able to benefit.

The funding comprises basic funding of 30% of the costs as well as various bonuses that can cover up to 70% of the investment costs. The KfW Bank handles the processing of all applications and there are special regulations for the submission of evidence. Companies and local authorities will also have the opportunity to submit applications in the coming months, while KfW will continue to offer low-interest loans for heating replacements and efficiency measures.

Real estate prices in Germany on the rise again: signs of a turnaround?

After two years of falling property prices in Germany, the latest figures show a slight recovery. In the second quarter of 2024, prices in all residential segments - from condominiums to single and multi-family homes - rose by an average of 2% compared to the previous quarter. This increase is particularly evident in large cities, where prices rose by 1.8% to 2.5%.

In a year-on-year comparison, prices in many places are still around 5% below the previous year's figures. This raises the question of whether this is a sustainable trend reversal. Experts agree that the housing shortage in Germany is supporting prices, while the persistently high mortgage interest rates are curbing purchasing power. Interest rates for ten-year loans are currently around 3.5%, which significantly increases the cost of real estate financing. Nevertheless, the situation remains interesting for buyers: there is still room to negotiate prices due to the excess supply on the market. However, experts expect the supply to gradually decrease, which could further stabilize prices in the coming months.