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30 05 2019

Rising Land Prices Jeopardise Housing Development Targets

There is a real chance that the shortage in development land could stall the construction of new-build housing in Germany in the medium term. This is the upshot of a survey compiled by the Prognos research institute on behalf of the Wohnungsbau alliance of building industry associations whose members include the IG Bau industrial union, the GdW Federal Association of German Housing and Real Estate Companies and the DMB German Tenant Union.1 The findings show that land prices in Germany’s A- and B-class cities almost doubled between 2011 and 2017. At the same time, fewer development plots changed hands, and this is particularly true for the metropolises, where sales have fallen by a third.2
 

Researchers Calling for an Active Zoning Policy and for Social Housing Development

It is a trend that is causing serious cost hikes in construction. The minimum square-metre rent investors have to charge to ensure even a conservative rate of return went up from eleven euros in 2011 to 12.70 euros six years later. According to the Prognos survey, there is a causal link between the land prices and the fact that it has proven impossible to meet the housing construction targets set out by Germany’s policymakers. As a result, the housing stock effectively rose by 210,000 flats only between 2011 and 2017, and this despite stepped-up efforts. The Federal Government has put the demand for new housing at 375,000 units per year.

“The general public has long been aware of the difficulties of keeping housing affordable,” the Immobilien Zeitung trade paper wrote, citing the statements by the alliance of interest groups on occasion of the survey’s release. Affordable development land, it argues, is a key prerequisite for affordable construction—without which there can be no affordable housing. The alliance therefore calls on policymakers to be more committed to the release of development land. Municipalities should actively designate development land or should keep land reserves on hand rather than selling them to the highest bidder through tender processes. At the same time, the interest groups reiterated their demand for a fixed social housing development quota. They believe no less than 80,000 publicly sponsored flats should be completed annually to satisfy demand.

Expert Opinion Discourages Raising Construction Standard

Rising construction costs are another price driver, and have been for some time. An expert opinion that the working group for contemporary building compiled for the Ministry of the Interior of Schleswig-Holstein provided a detailed breakdown of the various cost factors.3 The costs of shell and core construction, for instance, increased by 41 percent between 2000 and year-end 2018, the costs of structural interior fit-out work by 72 percent and those for M&E engineering work by an actual 146 percent. During the same period of time, the incidental building costs rose by about two thirds. Responsible for these cost hikes are not least the tightened energetic and general planning-law requirements, for example.

The expert opinion therefore recommends not to raise construction standards any further. Rather, verification procedures for the compliance with the requirements should be simplified and planning processes become more systematic—for instance, through serial construction and digital applications.4

 


1 www.handelsblatt.com/politik/deutschland/wohnungsmangel-zu-wenig-zu-teuer-zu-langsam-diese-fehler-macht-deutschland-im-wohnungsbau-/24316926.html?ticket=ST-1988415-aRdebg14eKokmZS7WU6V-ap1
2 www.immobilien-zeitung.de/1000061662/grundstuecksknappheit-dominiert-wohnungsbautag
3 www.kn-online.de/Nachrichten/Wirtschaft/Schleswig-Holstein-1.-umfassendes-Gutachten-ueber-Baukosten-veroeffentlicht
4 www.schleswig-holstein.de/DE/Fachinhalte/W/wohnen/Downloads /190513_gutachten_Baukosten.pdf?__blob=publicationFile&v=3