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Construction site in Leipzig: Housing is urgently needed

Photo: Jan Woitas / dpa

For a long time, the construction industry was booming. But in the face of rising interest rates and construction costs, orders are collapsing. Associations are therefore warning of a massive housing shortage. By 2025, in the worst case, there could be a shortage of 900,000 to one million apartments in Germany, Axel Gedaschko, President of the Central Association of the Housing Industry (GdW), told the "Bild" newspaper. He cited the "downturn in the housing industry" as the cause.

"In 2024, just over 200,000 apartments could be built. In 2025, the number of completed apartments could even fall below 200,000" if the federal government does not take countermeasures, Gedaschko said. As a "first step", he called on the federal government to reduce VAT from 19 to seven percent for building materials and services.

Felix Pakleppa, Managing Director of the Central Association of the German Construction Industry, called the slump in orders "catastrophic". Housing construction is in a nosedive," he stressed. The number of approved apartments no longer meets the demand by far."

Against this background, the ZDB chief executive called for an investment package from the federal government for the construction industry: "If the federal government has billions for the automotive industry, chip factories and industrial electricity, social peace on the housing market should also be worth a few billion in investments," he said.

The number of building permits fell by 31.5 percent or 9600 in July compared to the same month last year. A total of 2023,156 new apartments were approved in 200 as of July.

According to a company survey by the Ifo Institute, the crisis in German housing construction is also coming to a head. In August, 20.7 percent of companies complained about cancelled projects, as the Munich-based institute announced last week. In July, the figure was 18.9 percent.

According to Ifo, the main reason for the cancellations is the sharp rise in construction costs and interest rates. As a result, many projects that were profitable at the beginning of 2022 are no longer feasible today. "The reduction of subsidies due to the stricter energy-saving requirements also puts a strain on the calculation of the builders," explained Ifo expert Klaus Wohlrabe.

The Federal Ministry of Construction said it was working "intensively on a package of measures to revive the construction and real estate industry".