Building materials - wood
Despite the moderation overall in Germany's inflation rate, the prices of building materials show little sign of slowing down, as recent figures from the Federal Statistics Office show.
In particular, the price of cement has surged upwards again, although the price of wood has fallen since the beginning of the year, along with certain steel products.
The Statistics Office commented: "Despite the partly falling prices for individual building materials, the price level in the first half of 2023 for almost all building materials was above the level before the energy crisis", a reference to the Russian invasion of Ukraine.
The construction industry is feeling the effects of the Ukraine war well into the current year: in the first six months of 2023, for example, prices for lime and gypsum (up 67.7%) and cement (up 57.1%) were far above the level of the first half of 2021. Energy-intensive building materials such as flat glass - for windows, for example - rose by 45.4% over the period. The prices for most metal building materials rose by around one third (up 31.6%).
Full building wood, by contrast, is 28% cheaper than at the beginning of the year, while roof beams are 25.3% cheaper. Also cheaper are certain steel products, although their production is comparatively energy-intensive, as is that of mineral building materials. The statisticians say that reinforced steel bars cost 28.5% less than in the first half of 2022, while reinforcing steel mesh has seen price falls of 27.1%.
The problem with gravel and sand had been flagged at the end of last year by the Federal Institute for Geosciences and Natural Resources ([[Bundesanstalt für Geowissenschaften und Rohstoffe (BGR)]]) in Hanover, which had cited "resistance to the preservation or expansion of domestic extraction sites, excessively long planning procedures and the increased energy costs for extraction and processing" as reasons.
Gravel is mainly used in the production of concrete for building construction, civil engineering and road building, with finer-grained sand also an important resource. Many building materials had already become more expensive in the prior two years, even before the Ukraine war. Private house builders have been particularly affected by the broken supply chains, along with a lack of skilled workers.
An evaluation by BGR scientist Harald Elsner of the situation at 270 of Germany's more than 2,600 sand and gravel extraction sites concluded that "competing uses by water, nature and landscape conservation areas, infrastructure facilities such as roads and railways, residential development and commercial areas" could exacerbate the existing shortages of both construction raw materials. "In addition, private property interests often stand in the way of extraction."
To put this into perspective from the point of view of the builder or project developer - at least a third of the new-build housing units scheduled for 2023 has been scrapped, according to national housing association GdW.
Huge housing companies like Vonovia and LEG Immobilien have cancelled all new building projects for the year. They, and other developers, claim that where earlier they would have asked for a (cold) rent of €12 per sqm, they would now have to demand nearly €20 - a rent which only very few could pay.
Developers are convinced that the government has not taken on board the problems faced by the private sector in creating new housing to alleviate a growing housing crisis in the country. Although there are signs that they are starting to listen, Chancellor Olaf Scholz suggested to Berlin newspaper Tagesspiegel earlier this year, "Construction companies should be prepared to plan more flats now that are not designed to be rented for €18 per square metre, for example, or sold for more than €10,000 euros per square metre... This is where something has gone wrong in Germany over decades."
Nonetheless, the German Construction Industry Association has done its maths and comes to the conclusion: no, it's not possible now to build for much less than €18 per square metre. They list out the various costs. In urban multi-storey housing, the land price alone costs an average of €600 per square metre of rental space. In addition, there are €150 for development, €300 for planning and approval procedures, €3,000 for construction and €225 for financing only for the construction period. The average costs add up to €42,000 per square metre. This works out at an average of €4,275 euros per square metre of rental space.
With a targeted return of 4% per cent, this results in a 'cold' rent of €14.25 per square metre, according to the association. Today, however, many municipalities stipulate in building projects that a certain proportion of the apartments must be rented at a low price, usually €6.50 per square metre. According to the construction industry, if 30% of the apartments are rented at this price, the remaining apartments must be rented for €17.57, and if the rate is 40% this pushes the other rents up to as much as €19.41.
