The German government, in an effort to support the struggling building industry, will indefinitely postpone plans to implement stricter building insulation standards, according to environment minister Robert Habeck. This decision comes ahead of a crucial meeting between government leaders and the building industry, including Chancellor Olaf Scholz, to address the significant downturn in the sector. The industry has been advocating for the abolition of these insulation standards, citing their high cost and negative impact on the already depressed construction industry. Habeck stated that the insulation measures can be delayed due to the heavy burden of high interest rates and inflation on the construction industry. He also mentioned that he does not foresee the introduction of the new standards during the current legislative period, which extends until late 2025.
The global property boom fueled by low interest rates had sparked interest in German property as a safe and stable investment. However, a sharp increase in interest rates brought an end to this boom, leading to insolvency for many developers as deals froze and prices declined. German housing prices experienced the sharpest drop since records began in the second quarter, indicating the challenging state of the country’s property market. Additionally, building permits for apartments in Germany fell by 31.5% in July compared to the previous year, highlighting the decline in demand affecting the construction and real estate industry.
Germany, which has seen a recent influx of population growth, aims to build 400,000 apartments annually but has faced difficulties in achieving this target. The distress in the real estate sector is not limited to Germany, as commercial real estate in the United States remains vacant after the pandemic, and one of Sweden’s largest landlords is facing significant challenges. China has also witnessed struggles among major property builders. In anticipation of the upcoming summit, the industry has been urging the government to provide an aid package. Industry leaders are specifically requesting the elimination of sales tax on property transactions and the establishment of a government-backed credit program to help borrowers cope with high interest rates.
In conclusion, the German government’s decision to postpone stricter building insulation standards aims to support the ailing building industry. The industry has been facing challenges due to high interest rates and inflation. The property market in Germany has experienced a significant decline, with falling housing prices and a decrease in building permits. The distress in the real estate sector is a global phenomenon, with similar issues observed in the United States, Sweden, and China. The industry is calling on the government for assistance, including the abolition of sales tax on property transactions and the implementation of a credit program.
