The estimated housing demand seems inconsistent.
The objective of constructing more homes annually is becoming more difficult for the construction sector, particularly in major cities. This is due to an overlooked migration boost caused by the Ukraine conflict.
The demand for new houses and apartments is higher than initially anticipated owing to a significantly increased influx of migrants to Germany. Between 2021 and 2025, it's predicted there would be a need for 372,000 housing units annually as opposed to the initial estimation of 308,000, according to the Institute for the German Economy (IW) in Cologne. Between 2026 and 2030, that number would drop to 302,000 new housing units per year.
In 2021, 294,400 housing units were completed. The construction industry projects around 235,000 housing units will be finished this year.
Comparatively, construction activity in Germany (2021 to 2023) is at a lacking 79% of the yearly demand, according to the IW. The gap is particularly noticeable in the country's top seven cities. The proportion of present and necessary building activity is just 59%.
Stuttgart and Cologne construction is lagging
Cologne and Stuttgart have the lowest construction activity, according to an IW study. Between 2020 and 2023, only 37% and 43% of the required housing units were built in Cologne and Stuttgart, respectively.
The IW had previously miscalculated migration due to the Coronavirus pandemic. However, since February 2022, 1.3 million refugees have migrated to Germany from Ukraine due to the Russia-Ukraine war, as reported by academics. In total, migration was underestimated by 1.5 million people.
The IW has urged for urgent incentives and structural reforms to enhance the housing market's situation. For example, they propose simplifying building laws or increasing available building land in municipalities, as suggested by expert Michael Voigtländer in the Funke Media Group's newspapers. Germany's federal states could consider granting tax reliefs on land transfers.
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The increased migration due to the Ukraine conflict has led to a higher demand for residential construction, particularly for apartments. The construction industry needs to address this inconsistency between the rising demand and the current housing supply, especially in major cities.
