LEG Immobilien: German Housing Completions Forecast to Remain Below 200,000

A continued slowdown in German housing construction is anticipated, with completions projected to remain below 200,000 units annually through 2028, according to a recent forecast from the Ifo Institute. The revised projection, down from earlier estimates of 205,000 in 2027 and 215,000 in 2028, reflects escalating construction costs, driven in part by geopolitical factors including the conflict in Iran, and persistently high interest rates.

This year is expected to see completions fall to a 15-year low of 185,000 units, a further decline of 20,000 from 2025. The Ifo Institute attributes the ongoing suppression of new builds to a confluence of three key factors since 2022: significant price increases in construction services, a surge in building financing costs, and a substantial reduction in government subsidies. While the federal government’s “Bau-Turbo” initiative aims to expedite permitting processes, it is not addressing the fundamental issue of project financing.

According to Axel Gedaschko, President of the German Federation of Housing and Real Estate Companies (GdW), the initiative fails to resolve the lack of financial viability for many approved projects seeking affordable rental rates. The situation is also deteriorating in social housing, further limiting options for families, young people, and those seeking affordable accommodation. The current projections fall significantly short of the estimated 320,000 new housing units needed annually through 2030, as calculated by the Federal Institute for Building, Urban and Spatial Research.

The projected decline in new housing units has implications for companies like LEG Immobilien, potentially impacting rental yields and vacancy rates. While the filing does not directly address LEG Immobilien’s specific exposure, the broader market trend suggests increased pressure on the supply side of the rental market, a critical factor for a major residential property company. The sustained challenges in German housing construction will likely remain a key consideration for LEG Immobilien’s strategic planning and financial performance.