Is Merz making everything new? What tenants and owners can expect now
Dear reader,
"Build, build, build," is Friedrich Merz's motto. The new chancellor knows how scarce housing is in Germany. Whether the new government will be able to boost housing construction remains to be seen. The situation on the real estate market remains tense. In this issue, we take a look at the biggest problems.
We wish you an exciting read
Your Johanna Apel
An abandoned construction site: There is still too little construction going on to meet demand.
First, the good news: There are increasing signs of optimism in the real estate market. This is evident, for example, in the fact that more people are turning to mortgages again. The Association of German Pfandbrief Banks (VDP) observes that banks are granting significantly more real estate loans than a year ago.
There's also some movement in building permits. At the beginning of the year, more apartments were approved than in the previous year. However, it's important to remember that a year ago, the level was still alarmingly low.
Which brings us to the bad news. The housing market isn't really picking up yet. The Federal Statistical Office just released sobering figures: only 251,900 apartments were completed in 2024 – around 14 percent fewer than the previous year. This officially confirms that the traffic light coalition failed to achieve its stated goal of creating 400,000 apartments per year during its time in government.
Although the successor government—which also includes the SPD—has refrained from promising a fixed number of apartments, it's clear that something needs to change in the housing market. The Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) recently estimated the need for apartments at 320,000 per year. This is how many units would need to be added by 2030 to meet demand.
Friedrich Merz knows that housing is scarce. The new Minister of Construction, Verena Hubertz, knows this too. The 37-year-old SPD politician from Trier now faces the mammoth task of tackling this. "The excavators have to get rolling again," she said shortly after taking office. Hubertz explains how she intends to achieve this in this interview:
Simply building won't be enough, though. Let's take a quick look at the complex situation: While many people in large cities and metropolitan areas are desperately looking for an apartment, a good 2 million apartments are vacant in rural areas. It's also important to consider that the number of square meters per capita has been rising for years – and that Germany's population is aging. All of this plays a role in the demand for housing. Or to put it another way: A small, unrenovated attic apartment in the countryside may be available at a fair price, but that doesn't help many people.
Verena Hubertz is the new Federal Minister for Housing, Urban Development and Construction
Source: photothek.de
And anyone looking to build or buy still has to factor in high real estate prices and construction costs. Tough approval processes and slow bureaucracy don't make things any easier. The fact that many administrations are lagging behind in digitization and some projects simply lack skilled tradespeople is another factor. At least, the situation regarding construction interest rates has eased somewhat. More details on the recent ups and downs can be found here:
Therefore, no real relief can be expected for tenants – on the contrary, as apartments are becoming increasingly expensive. In the first three months of the year, rents nationwide rose by 4.3 percent compared to the same quarter last year.
One of the things the federal government now wants to tackle is the extension of the rent control in strained housing markets. The cabinet initiated this move this week.
In addition, the red-black coalition wants to tighten regulations on index-linked rents and short-term rentals. Above all, more housing is needed to ease the situation somewhat. To make it easier for people to own their own home, they want to restructure the KfW funding programs and make it easier for municipalities to designate building sites. Hubertz also wants to reduce construction costs so that rents below €15 per square meter are once again possible in new buildings.
Important for homeowners: The "traffic light" heating law is to be abolished and revised. Anyone who inherits a home will be able to deduct the costs of energy-efficient renovations from their taxes in the future. Also on the black-red to-do list are tax breaks for landlords who offer affordable housing, a strengthening of social housing, and a reduction in bureaucracy. At the top of the agenda is a "housing construction boost," for which a draft bill is expected within the first 100 days.
Will the Merz cabinet succeed in reversing the trend? We'll definitely stay tuned. And hopefully you will, too.
Stairs, thresholds, narrow bathrooms: Many houses in Germany are uninhabitable for people with disabilities. According to the Workers' Welfare Association, there were recently approximately 560,000 accessible apartments—not nearly enough, according to AWO President Kathrin Sonnenholzner. This makes finding housing extremely difficult for people with disabilities. We asked around to find out what this means:
Construction interest rates have become accustomed to the 3-point mark. According to loan broker Dr. Klein, the current top rate in a sample calculation is 3.31 percent (effective annual interest rate). This assumes a net loan amount of €350,000 with a ten-year term.
A landlord is not allowed to pass on all utility costs to tenants. Is your utility bill accurate? Or are you paying too much?
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