Construction Woes Amidst Billions Earmarked for Infrastructure: Is Housing Left Behind?
Construction of new housing developments potentially delayed due to allocation of funds towards infrastructure projects.
Let's face it: the property market's current chatter isn't about why house prices are ballooning again after a brief lull. It's all about the wicked housing shortage and the jaw-dropping fact that new housing developments are few and far between. Many renters eye homeownership given the tense rental market, but alas, there just aren't enough houses and apartments to go around.
Recently, soaring construction costs and financing costs have conspired to further diminish new construction. And now, the big question on everyone's minds is: how will the ample infrastructure billions of the new black-red administration impact the market? Will we see more apartments being built—or will they slow down the construction process even further due to a construction price explosion?
ntv Early Start: Construction Chief Hübner - A Crying ShameThe coalition has earmarked hundreds of billions of euros for infrastructure. But it seems that the funds won't primarily go towards the construction of new living spaces, at least not directly. "We don’t have a crystal ball to see exactly how the special fund will be used," admitted real estate economist Michael Voigtlaender from the prominent German Institute for Economic Research (IW). "But rest assured, folks in the construction industry will be eager to snatch a piece of this pie."
"Many new orders will come pouring in—a development that is, in essence, inflationary," fretted Daniel Ritter from von Poll Immobilien. Even though it appears that infrastructure billions will most likely land in civil engineering companies rather than construction companies, there's still a potential risk that "construction capacities will be diverted away from housing construction," warned Voigtlaender. As it stands, the construction sector operates with a utilization rate of just 70 percent, significantly lower than the utilization rates seen in the boom years before 2021.
Economist's Take: Pressure on the Housing Market to IncreaseBeing stagnant for some time now, housing construction could see idle specialists from the construction sector jumping ship to civil engineering. If they did, they'd be missed when the housing sector revived. This would translate to rising personnel costs, as construction companies would be forced to hire new employees or poach them expensive from elsewhere.
The moral of the story, according to economist Voigtlaender, is that politics must now step up to ensure an upswing in housing construction to prevent the brain drain from the housing sector. One possible solution would involve beefing up support for self-builders and private homeowners, whether it's through increased state subsidies, expanded tax depreciation options, lower real estate transfer taxes, or subordinated loans to help first-time homebuyers achieve their dream.
But the requirements for energy renovators would also need to be relaxed from the current high standards to encourage more homeowners to carry out energy renovations. This would help keep construction workers employed and prevent skilled workers from gravitating towards road or bridge construction.
Economy Trend Reversal? Despite Special Assets: Construction Industry Expects a DeclineThe funding landscape for energy renovations would need to be streamlined. In the past, the previous government's communication of changes in subsidy amounts and overall fundingpots created confusion and uncertainty for the industry. "We need clarity regarding funding," emphasized Voigtländer, "the zigzag course was a major pain."
Homebuilders, property buyers, and homeowners alike rely on long-term planning for their projects, as they usually involve substantial investments and loans. However, this long-term planning has become a distant dream, which is evidenced by the current low renovation rate of just 0.7 percent.
"We anticipate seeing more activity in the existing market," stated Stefan Münter, CEO of financing platform Europace, "while private new construction is modestly gaining traction despite the escalating construction costs, while rental apartment construction is lagging behind." The market focus is undoubtedly on existing properties. "And modernization will remain a future trend, unaltered by the infrastructure package."
In conclusion, the infrastructure investments aim to supercharge the broader economy rather than targeting housing specifically. However, they could indirectly support housing construction by making areas more desirable, potentially increasing demand and supply in certain regions.
This text was first published on capital.de
Source: ntv.de
Keywords:- Housing construction- Real estate- Infrastructure investments- Black-Red- Construction industry
- The infrastructure billions of the new black-red administration might not directly aid in the construction of new living spaces, but the increased orders in the construction industry, predominantly civil engineering, could divert construction capacities away from housing construction, potentially leading to escalating personnel costs.
- To prevent the brain drain from the housing sector, politics must take action to encourage an upsurge in housing construction, maybe by beefing up support for self-builders and private homeowners, streamlining the funding landscape for energy renovations, and relaxing energy renovator requirements to keep construction workers employed and prevent them from gravitating towards road or bridge construction.
