Hundreds of thousands of apartments are missing
Vonovia leaves 60,000 building plans in a drawer
September 20, 2023, 10:18 a.m
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The massive housing shortage in Germany will continue to increase. Due to high interest rates and construction costs, real estate companies are also continuing to scale back their activities. This also applies to the Vonovia company, which is putting plans for 60,000 apartments on hold.
Germany’s largest real estate group Vonovia says it is foregoing the construction of tens of thousands of new apartments for the time being due to high interest rates and construction costs. “We have plans for a total of 60,000 apartments in the drawer,” said CEO Rolf Buch to the newspapers of the Funke media group. “We’re getting everything ready until the building regulations are approved. And we hope that building will soon be worthwhile and profitable again. Then we want to build again immediately.”
From Buch’s point of view, there is currently a lack of more than a million apartments in Germany. “My estimate is: We need 700,000 apartments a year, also because of increasing immigration.” The problem is not a million apartments, but rather several million apartments that are missing in a very short period of time.
The construction costs used to be 3,000 euros per square meter, but today they are 5,000 euros, added a company spokeswoman. “Our average rent in the existing buildings is around 7.50 euros, and many people with medium or low incomes live here. That’s why we also pay attention to affordable rents of around 10 to 12 euros for new buildings.” The high construction and financing costs would therefore lead to a rent of 20 euros per square meter in a new building. “But many people can no longer afford that,” it said.
Other experts made similarly drastic comments. Axel Geddaschko, the president of the leading association of the housing industry, said in an interview with the “Bild” newspaper that, in the worst case, there would be a shortage of 900,000 to one million apartments by 2025. Felix Pakleppa, general manager of the Central Association of the German Construction Industry, called the drop in orders “catastrophic”. “Housing construction is in a nosedive,” he emphasized. “The number of approved apartments no longer covers the demand.”
Ministry of Construction announces “package of measures”.
According to a company survey by the IFO Institute, the crisis in German housing construction is worsening not only at Vonovia, but across all sectors. In August, one in five companies (20.7 percent) complained about canceled projects, as the Munich institute reported. In July it was 18.9 percent. According to the IFO, the reason for the cancellations is primarily the sharp increase in construction costs and interest. As a result, many projects that were still profitable at the beginning of 2022 are no longer viable today. “The reduction in funding due to the stricter energy saving requirements is also putting a strain on the builders’ calculations,” explained IFO expert Klaus Wohlrabe. The shortage of craftsmen is also fueling the situation.
The federal government had originally aimed to build at least 400,000 apartments per year, but now only around 200,000 apartments could be built in the coming year. This number is expected to fall even further in 2025. The Federal Ministry of Construction stated that it was working “intensively on a package of measures to stimulate the construction and real estate industry”.