Interviewer: Mr. Blazek, more and more well-known real estate companies are having to file for bankruptcy, most recently Gröner Group GmbH and Gussek-Haus Franz Gussek GmbH & Co. KG. These companies have played a key role in ensuring that more housing is being built in Germany. The more such companies go bankrupt, the less new housing is being built. The result could mean rising rents and a massive rush of applicants for the few remaining apartments. Are we sliding into a housing crisis? What can the federal government do to get the construction industry moving again?
Daniel Blazek: The situation is indeed alarming. The increasing number of bankruptcies in the construction industry points to structural problems that go far beyond individual companies. When large property developers and construction companies have to file for bankruptcy, it is a clear sign that the economic conditions in the industry are no longer right. This affects not only new construction, but also the entire housing industry. A housing crisis is looming, which could lead to noticeable bottlenecks, especially in urban areas.
Interviewer: What do you think are the main causes of these bankruptcies?
Daniel Blazek: There are many reasons for this. On the one hand, we are dealing with sharply increased construction costs, which are caused by higher material prices, wage costs and also by regulatory requirements such as energy-efficient renovations and environmental regulations. On the other hand, the increased interest rates for construction financing are making it more difficult to implement new projects. Many companies calculated in times of low interest rates, and the sudden increase in financing costs is now causing many projects to falter. In addition, there is stagnating demand because many people cannot currently afford to buy property due to the uncertain economic situation and high interest rates.
Interviewer: What measures could the federal government take to stop this development?
Daniel Blazek: The federal government has several levers it can use here. Firstly, financial incentives should be created to make the construction of new housing more attractive again. This could be done, for example, through direct construction subsidies or tax relief. Another important point is the provision of low-interest loans or funding programs for construction companies and developers. These measures could help to reduce financing costs and thus stimulate the construction of new housing again.
Second, the government should examine whether regulatory relief would be useful. This does not mean that environmental standards or building regulations should be relaxed across the board, but it could, for example, speed up construction processes and reduce bureaucracy so that construction projects can be approved and implemented more quickly.
Thirdly, increased support for social housing could help to create urgently needed housing, particularly in urban areas. Here, it would make sense to provide greater support to municipal and cooperative housing associations, as they often actively build even in economically difficult times.
Interviewer: Are these measures sufficient to avert the crisis?
Daniel Blazek: These measures would be an important step in the right direction, but they alone will not be enough to avert the crisis completely. A comprehensive package of measures is needed that includes all relevant players – from construction companies to financial institutions and municipalities. In addition, home ownership should also be promoted more so that more people have the opportunity to buy property and secure themselves in the long term.
Another point is the need to focus on modernizing the existing housing stock. Energy-efficient renovations and conversions could help to ease the need for new housing while at the same time achieving climate targets.
Overall, it will be crucial that the federal government acts quickly and decisively to stop the negative developments in the construction industry and restore confidence in the housing market.
Interviewer: Thank you, Mr Blazek, for your assessments and suggestions.
Daniel Blazek: You’re welcome. We can only hope that politicians recognize the urgency of the situation and take the necessary steps before the situation worsens further.
