Housing market pressures rise amid declining new construction

The housing market in Central Europe is facing significant challenges characterized by rising costs and a decline in new construction. In Austria, tenants face increasing financial pressure, sometimes spending tens of thousands of euros on renovations and adjustments for properties they do not own, reflecting a market where scarcity limits negotiating power.

In Germany, specifically in the Erlangen and Erlangen-Höchstadt regions, a study by the Pestel-Institut reveals a sharp drop in the construction of single- and two-family homes. In Erlangen, new housing units in this category fell to 51 per year, down from an average of 63 between 2020 and 2022. The decline is even more pronounced in the Erlangen-Höchstadt district, where annual new homes dropped from an average of 366 to 155.

This downturn has substantial economic implications. The Pestel-Institut estimates revenue losses of 8.3 million euros for the city of Erlangen and 127.9 million euros for the district, impacting construction companies, architects, and tradespeople. Experts warn of a social shift toward a ‘rental generation,’ as homeownership becomes increasingly inaccessible for middle-income households, particularly those aged 25 to 45.