German Housing Construction Faces Continued Decline: Euroconstruct Forecast
Introduction
Germany’s housing construction industry is set for a prolonged downturn in the coming years, according to a new forecast from the European construction research group Euroconstruct. The report predicts a steady decline in completions until 2027.
Key Findings
- Estimated 250,000 new housing units completed in 2022
- Projected 205,000 completions in 2023
- Further decline to 165,000 completions by 2027
Comparison with Europe
The expected 44% decline in housing construction from 2023 to 2027 places Germany as the worst performer in Europe, with a significant gap to the second-worst country, Austria (-37.3%). Most Western European countries are anticipated to experience a recovery in housing construction from 2026 onwards.
Factors Hindering German Construction
According to Ifo-Bauexperte Ludwig Dorffmeister, high construction costs are the primary factor suppressing market growth in Germany.
International Comparison
Despite a population of over 15 million less than Germany, the United Kingdom is projected to surpass Germany’s housing construction output in 2027, with an estimated 210,000 new homes.
Industry Reaction
The Central Association of the German Construction Industry has expressed alarm over the prognosis.
Analysis
Causes of the Decline
Several factors contribute to the downturn in German housing construction:
- Soaring building material costs due to supply chain disruptions and the war in Ukraine
- Labor shortages
- Regulatory and planning delays
Consequences of the Decline
The consequences of this decline are far-reaching:
- Exacerbation of the existing housing shortage
- Increased affordability challenges for homebuyers
- Reduced economic activity in the construction sector and related industries
Policy Recommendations
To address this crisis, experts recommend:
- Providing subsidies and incentives for affordable housing development
- Streamlining regulatory processes to accelerate project approvals
- Investing in vocational training to address labor shortages
- Exploring innovative construction methods to reduce costs
Conclusion
The Euroconstruct forecast highlights the urgent need for decisive action to revive Germany’s housing construction industry. By addressing the underlying challenges and implementing effective policies, decision-makers can mitigate the decline and ensure a sustainable housing market for the future. Failure to act would have severe consequences for the German economy and society as a whole.
