Purchases of building land decrease by 34 percent
Prerequisite for building houses and apartments is building land. It is available, but it will be bought significantly less frequently in 2023 than in the previous year. This could once again push the already missed targets of the Federal Government even further away.
Increased interest rates and high construction costs keep many people in Germany from buying building land. The number of transactions of build-ready residential land in Germany reached a historical low in 2023, as well as the associated area and sales volume, according to a study by the Hamburg Institute for Urban and Regional Research (Gewos). The authors see this as a fatal signal in the fight against the housing shortage, particularly in cities.
There were approximately 46,700 purchases of build-ready residential land nationwide in the previous year, 34% fewer than in the previous year, according to the study based on actual transactions. The area transaction fell by almost 40% to around 4,400 hectares, and the sales volume by more than 45% to 8.9 billion euros.
"Both the transaction volume and the area transaction in 2023 marked record lows since the beginning of the comprehensive time series of the investigation in 1995," said Sebastian Wunsch, head of real estate market analyses at Gewos. "The currently unsold areas are the permits not granted tomorrow and the houses not built the day after tomorrow," he warned. Density increase and stacking alone will not close the demand gap.
Gewos records the real estate transactions for all free cities and districts in its Immobilienmarktanalyse IMA annually. The analysis has been conducted since 1982.
Sales of residential land since 2021 have been halved
Measured at the peak in 2021 during the real estate boom, the declines are even greater: The sales of residential land have decreased by 54%, the area and sales volume by around 58% and 60% respectively.
Sales of residential land are a good leading indicator for new construction, it was stated. "While the decline in building permits in this and the coming years is expected to manifest itself in falling completion numbers, the low sales figures of build-ready residential land and increasing land indicate a long-term low new construction activity in Germany." In addition, there are also declining figures for potential building land, i.e., the perspectively usable areas for housing construction.
According to the Federal Statistical Office, 294,400 apartments were completed in 2023 - slightly fewer than in the previous year (295,300), but significantly more than initially expected by economists and the real estate industry. The weak construction conjuncture and the decline in building permits are likely to have an effect on completion numbers with a time lag.
The Federal Government had aimed for 400,000 new apartments per year in its coalition agreement. However, in addition to complex requirements, the significantly increased construction costs and interest rates burden the housing construction.
The decline in sales of build-ready residential land is affecting the construction industry, with the number of transactions, area, and sales volume all decreasing significantly in 2023 compared to the previous year. This trend is seen as a concerning sign in the fight against housing shortages, especially in urban areas.
The Federal Statistical Office reported that while less housing was constructed in 2023 than initially expected, a higher number of apartments were completed compared to the previous year, with 294,400 units being completed.
The decrease in sales of residential land since 2021 has been substantial, with the figures for sales, area, and sales volume all showing significant declines. This decline in sales is often seen as a leading indicator for new construction activity.
High construction costs and interest rates are reportedly making it challenging for the housing construction industry to meet the targets set by the Federal Government, such as constructing 400,000 new apartments each year.
