Commerz Real’s CEO Henning Koch told IPE Real Assets that the government’s package of measures, unveiled last week, is likely to have a positive impact, contributing potentially to alleviate the housing shortage in Germany in the medium term.

But, as a whole, it is not sufficient to revive the housing construction industry, which has almost come to a standstill, and to put a stop to the rapid rise in rents, he said.

‘I wished more, because the hurdles for synergies between project development and construction of affordable housing on the one hand, and profitability for investors on the other, are very high, even with this package of measures,’ Koch added.

Increasing costs for building materials resulting from Russia’s war against Ukraine, higher interest rates and a lack of skilled workers have ‘massively slowed down’ investments of the housing and construction industry, the government said while laying out its plans. High interest rates and costs are also causing insolvencies of project developers.

The 14-point package aims to further support investments to build affordable and climate-friendly living spaces, as well as help the real estate and construction industry navigate challenges.

The plan is a first step in the right direction, but on its own will not lead to the construction of apartments on a significant scale in 2024, added Marcus Cieleback, chief urban economist at Patrizia.

They will not improve the risk-return profile of residential investments. ‘This is exactly where the problem lies – despite the government’s announcements the measures will not have a significant effect here,’ Cieleback told IPE Real Assets.

He also said that while many aspects of the package point in the right direction, it is certainly not the ‘big hit’ leading to the construction of many more homes in the next 18 to 24 months.

‘The specific design of many measures announced still has to be worked out politically. This is not an “immediate measure’ that quickly solves the causes of the housing shortage,’ he added.

High interest rates and costs are also causing insolvencies of project developers, and large listed developer Vonovia has put the construction of around 60,000 apartments on hold.

‘Rising interest rates, and the resulting attractive offers for alternative investment options, lead to completely different return requirements from investors, so that the measures [of the government] must meet the needs of both project developers and investors,” Koch said.

Cieleback added: ‘Any further slump in new construction activity would be fatal, given the striking housing shortage that already exists in metropolitan areas.’