German builders are facing imminent collapse.
Rolf Buch, the CEO of Vonovia, Germany’s largest landlord, warns that the construction industry is being pushed towards a catastrophic situation. This crisis is not the only economic problem in Germany, but it is particularly severe, affecting a sector that contributes 12% to the country’s GDP and employs 1 million construction workers. Therefore, it is crucial for the well-being of the German economy and society.
When the government came to power in 2021, it promised to build 400,000 flats annually. However, industry groups estimate that around 700,000 flats per year are actually needed, especially to accommodate the more than 1 million Ukrainians who have fled their war-torn country. Regardless of the exact number, everyone agrees that the 295,000 flats built last year were insufficient. Mr. Buch refers to the resulting shortage of affordable flats in certain regions as a “societal tinderbox.”
This year, the number of flats constructed is expected to be even lower. The prices of materials and energy have skyrocketed due to disruptions in the supply chain, some of which are related to war. Additionally, higher interest rates have increased the cost of debt that many German builders rely on to initiate projects. Consequently, construction companies and property developers are going bankrupt in large numbers. In the first four months of this year, 437 building companies filed for insolvency, a 20% increase compared to the same period in 2022. Last month, Gerch and Development Partner, two developers from Düsseldorf, Project Immobilien from Nürnberg, and Euroboden from Munich went out of business.
2023-09-07 09:20:20
Post from www.economist.com
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