The German government has recently announced its decision to leave aside proposed building regulations. This move happens to be part of a relief package worth €45 billion aimed at supporting the struggling construction industry in Germany.
It is well to be noted that construction firms in Germany have been facing challenges due to inflation and increased interest rates.
Berlin has already committed to providing €18 billion for affordable housing until 2027, while extra funds will be contributed by federal states as well as municipalities. Chancellor Olaf Scholz has expressed the need for a significant increase in housing construction activities in Germany during a press conference before his meeting with industry leaders. The purpose of the meeting was to tackle the housing crisis prevailing in Europe’s largest economy.
The Chancellor reaffirmed that they are in need of an increased affordable housing.
Stringent insulation standards have been put on hold
The government has opted to indefinitely postpone strategies to implement stricter building insulation standards. This decision has been aimed at supporting the struggling industry. It is well to be noted that the industry has been advocating for the elimination of these initiatives, disputing that they are excessively costly.
Additionally, the government has also voiced its opposition to newly suggested European Union legislation that could potentially mandate the upgrading of millions of buildings through measures such as insulation or the implementation of effective heating systems. Opponents of the law are concerned that it places an excessive burden on both the government as well as homeowners.
For several years, the German property market has witnessed a boom, largely driven by low interest rates. Yet this period of expansion came to an abrupt halt when interest rates rapidly rose. As a result, many developers faced economic challenges, with deals growing stagnant and property prices declining. According to government statistics released recently, housing prices in Germany experienced their largest decline since records began in the second quarter.
As per Felix Pakleppa, who happens to be the head of the Central Association of the German Construction Industry, the federal government has finally acknowledged the seriousness of the housing market scenario. Prompt implementation of this is crucial for local, state, and federal governments.
According to German construction minister Klara Geywitz, the government plans to allocate €480 million over the next 2 years to encourage the transformation of vacant offices and shops into residential flats. This initiative has the potential to generate 235,000 new apartments. She stated that with the new funding, a greater number of individuals will have the opportunity to buy a house, whether it be an existing one or a newly constructed one.
The minister announced additional measures, such as extending the speed bonus, to encourage climate-friendly heating installations. Furthermore, the subsidy amount for updating a heating system will be increased from 20% to 25%, said the minister.
The German Construction Industry Association opines that the sector is in need of liquidity. They are not seeking subsidies but rather incentives for investment, stated Tim-Oliver Mueller, the chief executive of the association.
