Although property prices recorded a historic year-on-year decline of 9.9% in the second quarter of 2023, buying a property remains more financially unaffordable than renting. Even if rents continue to rise by 20 percent, buying a property is still a less attractive option than renting due to the high interest rates on loans. According to a study by credit insurance group Allianz Trade, the housing market is increasingly characterized by rising rents and real wage losses. The current inflation and the rise in interest rates have made construction projects much more expensive, leading to a significant decline in building permits. An almost one-third drop in the number of building permits for apartments in August 2023 compared to the previous year reflects the increasing housing shortage. The poor order situation mainly affects medium-sized subcontractors. They cannot raise or lower prices for their products or services as much as large companies (so-called pricing power) and are coming under pressure due to a lack of orders.
The study also shows that insolvencies in the German construction and real estate sector had risen by 20 percent by August 2023 compared to the previous year. This accounts for 21% of all insolvencies in Germany. This trend is being driven by a decline in building permits and numerous construction stops due to high interest rates and material costs.source and further information: allianz-trade.de
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