Living - Housing industry sees slump in new construction investments
The municipal housing industry is expecting a slump in new construction projects in Saxony this year and next - including in social housing. "This is dramatic because these are often projects that were intended for the small purse," said Alexander Müller, Director of the Association of the Housing and Real Estate Industry (vdw), in Dresden on Thursday. In a survey, member companies in Saxony stated that around 85 percent of the new construction projects planned for this year could no longer be realized in the current situation. Around 80 percent of companies stated that they would not be able to build any new apartments in 2024.
"This also includes social housing construction, where we will almost have a cessation of activities," said Müller. The vdw Saxony comprises 127 mainly municipal housing companies, which manage around 303,000 apartments, around a fifth of the rental apartments in Saxony. The association also anticipates a decline in residential construction among its members in 2025. For comparison: in 2022, around 164 million euros were invested in new construction by the municipal housing companies in the Free State.
Müller criticized the lack of funding, particularly in social housing construction. The head of the association also cited the sharp rise in interest rates, high construction and energy prices and inflation as further reasons for the slump in construction activity. 2023 was a "catastrophic year in terms of housing policy", Müller criticized, referring to the policies of the traffic light government in Berlin. Subsidy programs were suddenly terminated and the heating law was implemented "botched".
The association did not rule out the possibility that rents would have to be increased in some existing properties. In 2022, the average basic rent for municipal housing companies was EUR 5.22 per square meter - around three percent higher than in the previous year. "That is still well below inflation," says Müller. In addition, the price of district heating is expected to "triple to quadruple" in some municipalities, he said. From March 1, gas and district heating will again be subject to the normal VAT rate of 19 percent. To ease the burden on consumers, the rate of 7 percent was temporarily applied.
The association called on politicians to provide reliable framework conditions and sufficient subsidies for new construction, for example. If companies were to build without subsidies, the minimum rent per square meter would have to be between 12 and 13 euros to cover the costs, according to Müller.
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- Despite the challenging economic conditions, Alexander Müller, the Director of the vdw in Dresden, still hopes to initiate a new building project in Saxony, as liveable housing is crucial for the community.
- The high inflation rate and the sharp rise in interest rates, energy prices, and construction costs have led to a significant break-in in housing construction activities for many municipalities and housing companies across Saxony.
- In an effort to ease the burden on consumers, municipalities are considering increasing rents for some existing properties, with Alexander Müller, the head of the vdw, stating that the 2022 average basic rent of EUR 5.22 per square meter is still well below inflation.
- The vdw Saxony, which comprises 127 mainly municipal housing companies, has managed about 303,000 apartments, approximately a fifth of the rental apartments in Saxony. The association anticipates a continued slump in residential construction amongst its members in the coming years.
- Alexander Müller, along with other housing industry leaders, urges politicians to provide reliable framework conditions and sufficient subsidies for new construction projects, as building without subsidies would result in a minimum rent per square meter of between 12 to 13 euros to cover the costs.
Source: www.stern.de
