The cost of a shared room in Germany now averages 489 euros per month. Meanwhile, the construction industry is facing a deepening crisis.
It’s under construction, but it’s too little, too expensive, and not a critical part. Photo: Thomas Trutschel/imago
Berlin Taz | As rental apartments become increasingly scarce and expensive, the construction industry is increasingly in crisis. The number of building permits issued in July fell 19.2 percent compared to the same month last year, the Federal Statistical Office said Wednesday. That means that only 17,000 apartments were approved for construction this summer. Two years ago, more than 30,000 apartments were approved.
Sebastian Dullien, head of the Institute for Macroeconomics and Business Cycles (IMK), said of the development: “We have not yet reached the bottom and the tentative signs of stabilization in the past few months have proven to be deceptive.” The current level of building permits corresponds to around 200,000 new apartments per year. “The original federal goal of building 400,000 new apartments per year in Germany is now beyond the reach of this legislative period.”
The construction industry currently employs about 2.6 million people. For a long time, the industry performed relatively well due to low interest rates. In 2020, when the GDP decreased by 3.5% due to the corona crisis, the construction industry grew by 1.5%. The turning point came with rising costs, and above all, with the increase in interest rates due to Russia’s attack on Ukraine in February 2022. The European Central Bank (ECB) fought against rising inflation by raising interest rates. This increased the cost of borrowing, which had a negative impact on real estate prices and the construction industry.
The ECB has now cut rates again, but according to Dullien, she is too hesitant. “The interest rate on a 10-year real estate loan has risen from around 1% to almost four times its current low and is still more than three times higher than its current low,” the expert explains. “The housing shortage in the German metropolitan areas will continue for some time.”
Multi-person room 489 euros
The new academic year, which is about to start, will soon be the time when many students will feel how serious the housing shortage is. The average cost of a shared room at a German university is currently 489 euros per month. As a recent study conducted by the Moses Mendelssohn Institute in cooperation with the online platform wg-gesucht.de shows, the room price is on average 17 euros more expensive than in the winter semester 2023/24. Before the winter semester 2013/2014, the average cost of a room in a shared apartment was 324 euros.
For the analysis, the researchers evaluated more than 9,000 offers of shared rooms. Students in Munich have to pay particularly high prices. In the Bavarian capital, a room in a shared apartment costs an average of €790 per month. That’s €40 more than a year ago. The second most expensive city is Frankfurt am Main, at €680. Berlin comes in third. Here, rents remain consistently high at €650.
There is no rebound in the housing market anytime soon. According to economist Dullien, this is not expected until late 2025, when “the ECB will have cut rates significantly and these cuts will also have an impact on construction demand.”
