Renovation Rate in Existing Buildings Remains Far Behind Climate Targets

To achieve the climate targets in the building sector, at least two percent of the existing building stock must be energetically renovated each year. However, a new study shows that Germany is significantly lagging behind this goal. The renovation rate was only 0.72 percent in the first three quarters of 2024, and a rate of 0.61 percent is projected for the fourth quarter. This means the annual rate for 2024 is expected to be just 0.69 percent, which is even lower than the already low rates of previous years (0.7 percent in 2023 and 0.88 percent in 2022). What is particularly critical is that these low renovation rates could have far-reaching consequences for achieving Germany's climate goals. A current analysis by the Research Institute for Thermal Protection (FIW) concludes that emissions in the building sector will amount to around 80 million tons of CO₂ equivalents by 2030. This would exceed the upper limit of 67 million tons of CO₂ equivalents set by the Climate Protection Act by 13 million tons. According to experts, this gap could only be closed if both the Federal Funding for Efficient Buildings (BEG) and the Building Energy Act (GEG) focus more on the renovation and energy efficiency of the existing building stock.

New Signal for Timber Construction: Building Ministers Approve Model Timber Construction Guidelines

The conference of building ministers has reached an agreement after years of discussion on a new model timber construction guideline aimed at facilitating building with wood in Germany. This amendment will allow timber construction up to the high-rise limit and is set to apply to standard buildings in classes 4 and 5, such as larger multi-family houses and schools, starting in 2025. However, the EU Commission must still approve the amendment before it can be formally introduced in the federal states. With the new guidelines, it will also be possible to use timber panel construction for buildings of this size—a construction method where individual wooden elements are prefabricated and assembled on-site. This is expected to further reduce construction costs and speed up the construction process. Building Minister Ina Scharrenbach (CDU) from North Rhine-Westphalia welcomed the decision as an important step towards a resource-efficient construction method that strengthens sustainability in the construction sector. This decision was initiated by several federal states, including North Rhine-Westphalia and Bavaria, and aims to support the regional timber industry, which has regained importance in recent years.

Rent Control to Be Extended Until the End of 2028

Federal Justice Minister Marco Buschmann (FDP) has submitted a bill to extend rent control. The regulation, which was introduced in 2015 to limit rent increases in tense housing markets, is now set to remain in effect until the end of 2028. The extension is outlined in the coalition agreement; however, there have been disagreements regarding details within the governing coalition. The SPD and Greens advocated for a longer duration, while Buschmann set the end date at the end of 2028. Additionally, the new draft aims to ensure that rent control remains legally unproblematic even when applied repeatedly in the federal states. For this, states must now provide stricter evidence when designating certain areas as tense housing markets again. This evidence should explain what measures have been taken to ease the rental market in those regions. At the same time, the property owners' association Haus & Grund announced plans to sue against the extension, arguing that it hinders investments in housing construction and exacerbates scarcity. Haus & Grund finds it particularly problematic that the specific situations of furnished and temporary rentals, which have previously created loopholes for many landlords, are not taken into account. Therefore, the SPD and Greens are calling for an amendment to the law to close these gaps.

ECB Cuts Key Interest Rate for the Third Time—Loans for Home Construction and Real Estate Purchases Could Become Cheaper

The European Central Bank (ECB) has again eased its monetary policy and cut interest rates for the third time this year. At its meeting on October 17, 2024, in Slovenia, the ECB decided to reduce the key interest rate by 0.25 percentage points to 3.40 percent. The deposit rate, which banks receive when parking excess capital with the central bank, was also lowered to 3.25 percent. This latest interest rate cut, effective from October 23, 2024, aims to support the economy in the Eurozone, which continues to weaken. The key interest rate influences the cost of loans for banks and thus also affects construction financing and real estate loans—lower rates could facilitate home construction and real estate purchases as loans become cheaper. The ECB's decision came against the backdrop of declining inflation figures: In September 2024, the inflation rate in the Eurozone was 1.7 percent, according to Eurostat, falling below the target mark of two percent for the first time since 2021. At the same time, the so-called core inflation, which excludes energy and food prices, remains elevated at 2.7 percent. The ECB emphasized that future interest rate decisions will depend on data. The central bank intends to respond flexibly to economic and inflationary developments. Economists believe that the long-term inflation target has not yet been reached and that further adjustments may be necessary if inflation rises again.