- Federal Government's Proposed Action May Further Boost Housing Prices
Infrastructure Investment May Boost Housing Market but Potentially Increase Construction Costs
by Nadine Oberhuber
Housing prices are once again on the rise due to a housing shortage and minimal new construction, which has created a tense rental market. With the new black-red government set to invest hundreds of billions of euros into infrastructure, the question remains: will this facilitate new apartment construction or hinder it due to escalating construction costs and a shortage of skilled labor?
The federal government’s ambitious infrastructure spending could invigorate the real estate sector after a period of stagnation. If the coalition prioritizes housing within the infrastructure fund, it could lead to an increase in new apartment construction projects and thereby ease the housing shortage. However, concerns have been raised about whether these funds will primarily benefit the civil engineering sector rather than residential construction.
Michael Voigtländer, an economist from the employer-friendly Institute of the German Economy (IW), notes that the details of the fund's usage are yet to be clarified. Nonetheless, most industry players are eager to secure a piece of the investments. The shortage of labor in the construction sector is expected to become more severe, further driving up construction costs.
With an anticipated surge in new orders, Daniel Ritter from real estate agency Von Poll Immobilien fears that construction prices could skyrocket. Although infrastructure investments are likely to benefit civil engineering companies, there is a risk that residential construction capacities will be drawn, leading to a significant shortage of skilled workers. Consequently, construction companies would need to either hire new personnel or pay premium wages to poach them from other sources.
To avert these potential difficulties, Voigtländer suggests that the government should focus efforts on supporting self-builders and private homeowners. Increasing state subsidies for self-builders, expanding tax depreciation options, reducing real estate transfer tax, or providing subordinated loans for homebuyers to purchase properties with less equity could enable more people to start building or renovating now rather than postponing it.
Moreover, the requirements for energy renovators should be relaxed to incentivize more long-term property owners to undertake energy improvements. Simultaneously, the funding landscape for energy renovations needs to be streamlined to provide clarity regarding funding sources and prevent fluctuations in subsidy levels and programs.
Stefan Münter, CEO of financing platform Europace, predicts that the infrastructure investment will primarily stimulate activity in the existing property market, with modernization being a crucial topic moving forward. This trend is expected to persist despite the potential expansion in private new construction and the struggle in rental apartment construction.
In conclusion, the government's infrastructure investment and supportive policies are set to stimulate an increase in new apartment construction projects by easing planning and funding constraints. However, regulatory changes and external factors could contribute to a continued challenge in affordability within the housing market. While the infrastructure billions are likely to foster a more dynamic real estate market, supply may continue to lag demand as house prices rise moderately due to tight supply.
- The commission, with its proposal for a directive on chemical substance protection, could potentially aid in managing the sudden increase in construction activities resulting from the infrastructure investment, ensuring the health and safety of workers.
- On the other hand, businesses involved in the finance and investing sectors might find profitable opportunities in the housing market with the anticipated surge in real estate activities.
- As the housing-market get boosted and construction costs potentially increase along with the labor shortage, it's crucial for the government to consider supporting self-builders and homeowners financially, ensuring a more balanced housing market for all.
