In Germany, a plunge in new housing construction threatens the country's economic recovery and risks deepening political divisions. Industry groups are calling for 23 billion euros in annual subsidies to build 100,000 social housing units and 60,000 affordable homes, accommodating workers and creating jobs. The real estate sector, once a cornerstone of the economy, is reeling from rising interest rates, with developers facing insolvency and prices falling. The DIW institute predicts a 5.4% decline in residential construction volume, resulting in a 5 billion euros tax revenue loss.
The housing construction sector in Germany is facing a crisis that threatens to derail the country's economic recovery and aggravate political divisions. Industry associations have sounded the alarm and called for substantial government intervention to address this critical issue. Specifically, they are urging the government to provide an annual subsidy of 23 billion euros (USD 24.70 billion) to facilitate the construction of 100,000 social housing units and 60,000 new affordable homes. This measure is aimed at accommodating an influx of workers, preventing people from falling into poverty, and creating new jobs in this economically vital sector.
The real estate industry has historically been a cornerstone of Germany's economy, contributing approximately one-fifth of the country's output and employing one in ten workers. However, the recent sharp rise in interest rates has brought an abrupt end to this prosperous period. Developers are facing insolvency as deals freeze and prices fall, casting a shadow over the once-thriving sector.
The DIW economic institute has predicted a nominal decline of 5.4% in residential construction volume for the current year, translating to a drop of almost 5 billion euros in tax revenue for the state compared to the previous year. This underscores the gravity of the situation and the potential ripple effects on the broader economy.
To alleviate the crisis, industry groups are also advocating for the relaxation of building standards, which could help reduce costs and accelerate construction. Their plea highlights the urgency of the situation and the need for swift and comprehensive action to prevent a "boomerang effect" that could severely impact Germany's economic recovery and exacerbate existing political tensions.
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