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Global Economy

Association: Building in Germany is likely to become even more expensive

An end to the price increase in construction is not in sight for the time being. This could become a problem for the federal government and its goals for more affordable housing.

From the point of view of the industry, construction prices in Germany are likely to rise again this year. Last year they rose by 6 percent – “that was the strongest increase in over 20 years,” said the general manager of the Central Association of the German Construction Industry, Felix Pakleppa.

This year, the association expects growth of 4 percent. “That means things are calming down a bit, but prices are still rising.” A level like before the pandemic is not foreseeable. “And that’s mainly due to the sharp rise in material prices,” said Pakleppa of the German Press Agency.

By far the most expensive construction timber has become. Prices would have almost doubled in 2021. “For plastic and insulating materials it was around 30 to 40 percent, for steel 70 percent,” said Pakleppa.

Since the turn of the year, construction timber has become somewhat cheaper. “We are now up 89 percent compared to the pre-pandemic period, so it is still at a very high level.”

Sustainable building contributes to the price increase

From the point of view of the construction industry, there are various reasons for this. More damaged wood in Europe due to the bark beetle plague is one thing, the significant increase in demand last year after the slump due to the 2020 pandemic is another.

The US also imported more wood from Europe after US tariffs made Canadian wood significantly more expensive, Pakleppa said. “As a result, many wooden houses in California were built with wood from Baden-Württemberg.”

In addition, there would be inflation, energy prices and wage increases, said Pakleppa. The construction industry is in a balancing act. “On the one hand, there is the goal in the coalition agreement that 400,000 new apartments should be built each year and that you should be able to rent apartments at affordable prices.”

On the other hand, there are ambitious goals in the area of ​​sustainability and climate change: “Such requirements also lead to construction becoming more expensive because we have to build with higher energy efficiency.”

CSU criticizes government for ending KfW funding

The main association of the German construction industry was more optimistic. “In the medium term, it is possible that individual investors will postpone residential construction projects if the price rally continues over the next few years,” said Managing Director Tim-Oliver Müller.

“But we’re not assuming that’s the case at the moment. Irrespective of this, care must be taken to ensure that tenants are not blamed 1:1 for rising prices.”

The CSU warned that the rising prices were affecting the federal government’s housing targets. “The announced further increase in construction prices this year is a brake on affordable and energy-efficient construction,” said parliamentary group leader Ulrich Lange.

In addition to rising material prices and wage increases, the confusion of the traffic light government about the loss of KfW funding also contributed to the worrying price development. It is unacceptable that families and tenants who have opted for affordable housing suffer as a result. © dpa

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