The rate of housing construction in Germany is expected to decline by 32 percent by 2025 thanks to increasing costs in the industry, a new study has claimed. Critics are urging the government to invest public funds in affordable housing to fill the gaps.

Housing construction rates in Europe will soon decrease

According to a recently published study by the Ifo Institute in Munich, Germany will see the rate of housing construction drop by 32 percent in the next two years.

Euroconstruct, the independent construction market forecasting network that carried out the research, estimates that only 200.000 houses will be built to completion in 2025, compared to the 290.000 that were completed in 2022.

Rising costs in the construction industry - which have partly been spurred on by the Ukraine war - increased interest rates and an uncertain housing market are cited as reasons for the forecasted decline.

With a 14 percent fall expected across Europe, the decline on the continent as a whole will be less dramatic than in Germany. In certain countries, namely Ireland, Portugal, Spain and Slovakia, construction rates are even forecast to increase by between 11 and 17 percent. 

Will Germany meet higher demands for affordable housing?

Across Germany, and particularly in German cities, there is already a shortage of affordable housing. Recent changes to Germany’s immigration law - which will see the country introduce a points-based system to help attract foreign workers, with the hope of plugging a record-high worker shortage - will hopefully bring lots of newcomers to the federal republic.

But, with the country already in the throws of the worst housing crisis in 20 years, and with private construction slowing, it doesn’t seem as though the German government has planned that far ahead in terms of where it imagines housing all of the new workers it desperately needs.

With potential buyers being priced out of the housing market and a shortage of affordable accommodation to rent, Germany’s Macroeconomic Policy Institute (IMK) has pushed for the government to invest more public money in constructing affordable housing that will make up for the gaps left by reduced private construction.

Thumb image credit: Jarama / Shutterstock.com