When he signed the purchase agreement for a three-room apartment in a newly built building in a popular Berlin district, Valeriy Shevchenko thought he had made the purchase of a lifetime. Two years later, the sudden halt to construction destroyed his dreams of owning the property.
The company that oversaw the construction, Project Immobilien, went bankrupt this summer after being hit by the real estate crisis that has been rocking Germany for several months.
“The cranes, the equipment for the workers, everything has been removed,” this 33-year-old father told AFP in front of a windowless concrete facade.
Rising interest rates that increase borrowing costs, falling demand, skyrocketing material prices… The number of corporate bankruptcies in the construction sector in Germany has doubled within a year, which has led to numerous construction sites being brought to a standstill. .
Chancellor Olaf Scholz invited industry experts to Berlin on Monday to present a comprehensive plan to revive the industry as the country faces a dire housing shortage.
On the agenda: expansion of public credit for families, regulatory and tax relief for developers, release of funds for social housing and public support for the conversion of office buildings into housing.
“250,000 euros”
The industry has benefited for years from the low interest rates made possible by the European Central Bank’s generous monetary policy, and construction sites in major German cities have multiplied.
But the ECB had to sharply raise its interest rates to combat inflation, which led to a collapse in demand for credit, the prices of goods for sale and the profitability of projects.
The market is slowing across Europe. However, Germany has been particularly affected, where property prices fell 6.8% year-on-year in the first quarter of 2023, compared to a slight increase of 0.4% for the eurozone as a whole.
At the same time, property developers are suffering from the rising costs of building materials caused by the coronavirus pandemic and exacerbated by the war in Ukraine.
Result: “Investors no longer know how to make certain projects profitable,” explains Tim-Oliver Müller, President of the HDB, to AFP.
According to a recent survey by the IFO Institute, one in five real estate companies said they canceled construction projects in August, while 11.9% of them faced financing difficulties.
In Berlin, the buyers of the Project Immobilien building in the central Prenzlauer Berg district had already paid for half of their property.
“I’m not rich. “My money is the fruit of my labor, and I’m paying interest on a loan from which I don’t even benefit,” complains Mr. Shevchenko, who says he paid 250,000 euros.
No insurance was taken out by the company or the future owners. The only hope is to find a buyer to complete the project or to complete it yourself.
“I never thought something like this could happen in Germany,” explains Marina Prakharchuk, 39, with tears in her eyes, who has already paid 175,000 euros for a 45 m² apartment in this building.
Social bomb
“More affordable housing must be built in Germany so that those looking for housing can find it,” demanded Chancellor Olaf Scholz at a press conference on Monday.
This crisis is a hard blow for his government, which promised to build 400,000 housing units per year when it took office at the end of 2021. But we are still a long way from that: the industry assumes that the number will painfully reach the 250,000 mark this year and even fall below 200,000 in 2024.
However, the need is enormous and has been exacerbated in recent years by the reception of large numbers of refugees and foreign workers in a country where there is a labor shortage.
A situation that could become a social bomb at a time when the lack of supply is leading to a sharp increase in rents. In Germany, half of the population does not own a home. Enough to further undermine the purchasing power of households already suffering from inflation, which is still above 6% in the country.