June 20, 2024

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German homebuilding collapse threatens wider economic damage

2 min read

Wolfgang Schubert-Raab recalls when the boom times were so good that his firm could not build homes quickly enough.

“Back in 2021, before we’d even poured the first cubic metre of concrete, we’d already had offers on more than half the complex,” said the managing director of the Raab construction company. Two years on, the market for single-family dwellings is in what Schubert-Raab describes as a state of “completely collapse”.

Across Germany, homebuilders are facing such a sharp reversal in their fortunes that the downturn in residential construction is threatening to have broader repercussions across Europe’s largest economy.

Many have declared themselves insolvent, dampening Chancellor Olaf Scholz’s target of building 400,000 new homes a year to tackle a housing affordability crisis in several of the country’s largest cities.

This week, the federal government combined with state legislatures to intervene, unveiling a package of measures aimed at speeding up housebuilding by cutting red tape. Industry representatives view the response as a step in the right direction, but are concerned the measures are not strong enough and the rollout will be far too slow.

Tim-Oliver Müller, managing director of the German Construction Federation (HDB), said: “Based on past experience, we don’t believe that it will be implemented quickly. The federal structures are far too complex for that.”

After a decade-long boom fuelled by strong demand, cheap credit and low costs for raw materials, German builders are now facing what Gereon Frauenrath, managing director of construction company Frauenrath Group, describes as a “perfect storm”.

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Raw materials are now more than 40 per cent more expensive than before the pandemic — the biggest surge in Europe. The credit-intensive sector must also grapple with 10 straight…

2023-11-12 00:00:53

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