Germany housing construction forecasts downgraded by Ifo Institute

The Ifo Institute has lowered its forecasts for new residential construction in Germany, predicting that annual completions will remain below 200,000 units through 2027 and 2028. Specifically, experts expect approximately 195,000 completions in each of those years, a significant reduction from previous estimates of 205,000 and 215,000.

This year, completions are expected to drop to 185,000, marking a 15-year low. Experts cite three primary drivers for this decline: a price shock in construction services, a interest rate shock in construction financing, and a substantial reduction in construction subsidies. Additionally, rising energy costs linked to the Iran-Krieg and increased labor costs are expected to further burden the sector.

While the federal government introduced the “Bau-Turbo” to accelerate permit processes, industry leaders note that it does not address the fundamental issue of project affordability. The gap between supply and demand remains wide, as the Federal Institute for Building, Urban Affairs and Regional Development estimates an annual need of approximately 320,000 new homes through 2030.