Gloomy. The construction industry is languishing in a deep crisis: rising interest rates, spiralling costs, high energy prices, ever-increasing bureaucratic costs. Added to this is the fall in prices for residential and commercial property, which makes refinancing or rescheduling expiring loans drastically more expensive. Or the path leads straight to insolvency, as in the case of the Signa real estate group with its various subsidiaries. Their most prominent construction ruin is located in Hamburg: the half-finished Elbtower (see photo), not far from the Elbphilharmonie concert hall.
But Signa is not alone on the construction industry's sidelines. A total of 27 large companies in the real estate sector had to file for insolvency in 2023. Across Germany, 1,164 real estate companies were affected by insolvency, almost a third more than in 2022. In most cases, this leads to construction projects being halted indefinitely.
The cities of Berlin and Hamburg have been particularly hard hit by the wave of insolvencies. The planned investment volume of the six largest construction companies affected by insolvency amounted to €3.8 billion in these two cities alone. In the event of insolvency, abandoned building ruins are often sold off at dumping prices, leading to a significant drop in prices in the real estate sector – compared to the previous year, 2022 saw a decline of 6.11% according to the Association of German Pfandbrief Banks.
Developments in the construction sector are diametrically opposed to the German government's stated target of 400,000 new homes per year. The framework conditions for the construction industry would have to be completely different if construction activity is to be reignited. Only when sufficient living space is available can prospective buyers or tenants find an affordable home. Ensuring this is one of the tasks of the federal government.
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