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Global Economy

New construction of apartments: Strongest increase in construction prices in Germany since 1970

    Highest level since 1970: In November 2021, the price for new residential buildings rose by a full 14.4 percent compared to the same month last year. What are the reasons for the price increase – and why the situation will probably not ease for the time being.

Tough times for builders: Above all, increased costs for materials such as wood, steel or insulating materials are driving up prices. In November 2021, new construction of conventionally manufactured residential buildings rose more expensive than at any time since 1970. According to the Federal Statistical Office, construction prices increased by 14.4 percent compared to the same month last year. According to the Wiesbaden authority, a stronger increase was last measured on Monday in August 1970, when it was 17.0 percent.

In the previous reporting month, August 2021, prices had risen by 12.6 percent year-on-year.

Building materials are scarce – and therefore expensive

Wood, steel, insulating materials and other building materials have become scarce in recent months. Limited transport capacities and high international demand as part of the economic recovery after the Corona crisis year 2020 are causing bottlenecks. According to the information, carpentry and timber construction work increased at an above-average rate in November, which cost 38.9 percent more than a year earlier due to the increased demand for construction timber at home and abroad.

According to Hans Peter Wollseifer, president of the craft trades, a relaxation on the price front is not to be expected anytime soon. “Construction will become more expensive in the future, not only because wages are rising, but because the prices for materials are rising,” said Wollseifer recently. “It is already becoming apparent that prices – even if the material bottlenecks ease – will not fall completely back to the pre-crisis level.”

The Munich Ifo Institute sees it similarly. Consequences of the lack of material would probably be a further increase in building prices. In building construction, according to the economic research institute, 31.3 percent of construction companies complained about delivery problems in December. That was a little less than in November (34.5 percent), but still a lot in a long-term comparison.

The situation is somewhat better in civil engineering: 23.1 percent of companies reported a lack of supplies, after 28.7 percent in November. “Despite the current improvements, the situation remains tense. The values ​​are still exceptionally high in a long-term comparison,” explained Ifo specialist Felix Leiss.

Industry still expects good business

In addition to the increase in material costs, the withdrawal of the temporary reduction in VAT also drove prices up in November compared to the previous year. The regular rates have been in effect again since January 2021, so goods and services have tended to become more expensive year-on-year. According to the statisticians, without the VAT effect, construction prices would still have risen by 11.6 percent in November 2021.

Despite the burden of material bottlenecks, the industry expects good business. In view of the full order books, the Central Association of the German Construction Industry and the Main Association of the German Construction Industry recently saw scope for a nominal increase in sales of around 5.5 percent to 151 billion euros in the main construction trade this year. Taking the price increase into account, the real increase is 1.5 percent.

A slight increase in sales of a nominal 0.5 percent to 143.5 billion euros is expected for the past year. According to the Federal Office, in October 2021 sales in the main construction trades increased by 3.4 percent compared to the same month last year. In the first ten months, nominal revenues were 1.0 percent higher.

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