Construction Costs Surge and Industry Downturn in Germany and Austria

German building costs have reached an "unspeakable level," according to Building Minister Verena Hubertz (SPD). The minister, who pledged to halve construction costs, presented a June action plan with 13 measures targeting digitalisation, simpler building methods, faster procedures and clearer funding programmes. Critics argue the plan neglects rising land prices, which have climbed from about €244 per square metre in 2021 to €283 in 2024, as well as the increase in material costs for bricks, aerated concrete and wood.

In Austria, EY forecasts the construction sector will hit its lowest point in 2026, with only a very modest recovery expected by 2028. High construction and financing costs, uncertain revenue prospects and limited affordable land are dampening the market. Residential new‑building activity remains weak; building permits rose slightly to roughly 11,000 in the latest year but stay far below the 23,000 permits recorded in 2021. Total construction volume is projected to fall to €51.7 bn in 2026 from €58.7 bn in 2021, a 12 % decline over five years, with growth of just 0.1 % per year through 2028.