Not only did real estate prices rise at record speed last year, but so did construction prices.

According to the assessment of the Association of German Pfandbrief Banks (VDP), to which the most important real estate financiers belong, the price increase will continue in the current year.

As the VDP real estate market researchers have now reported, the construction of residential buildings cost 9.1 percent more last year than in 2020.

Markus Fruehauf

Editor in Business.

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This year, Franz Eilers, head of real estate market research at the VDP, expects prices for new residential construction to rise by 8 percent.

According to his assessment, the prices for new office buildings and commercial buildings should develop similarly.

The main reasons for the price increase were the high demand for construction work and the sharp rise in the price of building materials.

For example, the prices for woodwork increased sharply on average over the year by 30 percent.

Continued significant price pressure

In addition, according to the real estate market researchers, there was a return to the normal rate of sales tax from 16 to 19 percent, which created a one-off base effect. “Unlike last year, the sales tax in 2022 will have no impact on prices. But the high utilization of construction capacities coupled with a shortage of workers and rising material and energy prices continue to exert considerable pressure," explained Eilers.

According to him, the order backlog in building construction in the third quarter of 2021 was significantly higher than the corresponding figure for the previous year.

"All in all, it can be expected that construction work will also become significantly more expensive in the current year, albeit not quite as much as in 2021," said Eilers.

He considers the high price increases for the construction market to be worrying as they would have a significant financial impact.

The real estate expert warned that "the price increases make it more difficult to plan investment projects and impair the renewal and expansion of the building stock".

For him, the question therefore arises as to whether inflation will continue at a similar level.