In Germany, the bubble has already burst.  There are disturbing signals from the Polish market

The rapid increase in housing construction costs has recently bankrupted many developers in Germany. At the same time, the number of newly issued building permits has decreased. As a result, contractors are seeing a significant drop in orders.

In contrast, apartment prices are also declining as of the third quarter of 2023. This is not a reason for Germans to be satisfied. Experts say that this is the result of the bursting of the bubble in the German housing market.

The rest of the article is below the video

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The German construction industry is seeking government support

Currently, developers who have been operating in the market for many years are going bankrupt in Germany. One such company is Project Investment, which declared bankruptcy while carrying out nearly 120 investments worth 3.2 billion euros in the largest German cities – Berlin, Munich and Hamburg. A similar fate also befell, among others, the development company Euroboden, which has been operating in the residential and commercial real estate market since 1999.

According to experts, bankruptcy decisions are due to high construction costs and low demand for apartments. This is also the result of overly optimistic assumptions. As Uwe Schmitz, head of Franconia Development, recently explained in an interview with Die Welt, many of his colleagues believe that interest rates will remain low for many years. At the same time, the sudden increase in inflation forced banks to react sharply. Material prices and labor costs also increased. This led to higher prices. However, developers are no longer able to pass on the increase in costs to customers.

Therefore, the prevailing mood among workers in the construction industry in Germany today has become bleak. According to data from the Institute for Economic Research (Ifo), the business climate reading in January fell to the lowest level in history, that is, negative 59 points. The situation in the housing market is also beginning to affect the entire economy of our western neighbor.

This is why the construction industry seeks government support. Felix Pakleba, Director General of the Central Association of the German Construction Industry, recently appealed on behalf of the organization to the government to take decisive action in housing policy.

This aid is even more important because Germany also suffers from a huge housing deficit. According to expert estimates, there is a shortage in the market of 700 thousand. Up to 1 million buildings.

It is worth noting that the German government in the coalition agreement undertook the construction of approximately 400,000 apartments annually.

“German political elites must redefine the state model”

Due to the changing global economic and political situation, the German economy finds itself in a very difficult situation today. For this reason, German political elites must redefine the current model of state development – admits Dr. Damian Kacmierczak, Member of the Board of Directors and Chief Economist of the Polish Association of Employers in the Construction Sector (PZPB), in an interview with

The expert also draws attention to the fact that the general economic situation in Germany is bad.

Germany has terrible demographics, outdated transportation infrastructure, and industry is isolated from cheap raw materials from Russia. In addition, the global economic slowdown is undermining German trade. In contrast, the German automobile industry is losing competition with Chinese electric cars, and the real estate and construction sector, including housing, is now on the brink of collapse, he points out.

Also remember that according to data from the Federal Statistical Office, new orders in the German construction industry fell to their lowest level in the period 2008-2009, excluding the shock caused by the outbreak of the Covid-19 epidemic in 2020.

Interest rate cuts are hope for the real estate sector

– The immediate cause of the crisis was the sharp rise in interest rates and construction costs at the end of 2022, which put an end to the intensive development of the German market, This is a result of the loose monetary policy followed by the Eurozone in the past Since 2009 – explains Damian Kaczmirczak.

As a result, many developers fell into a debt spiral and were unable to pay their obligations to creditors.

The only hope for the real estate sector, not only in Germany but throughout Europe, is a reduction in interest rates by the European Central Bank. Which some experts expect as early as 2024. He points out that German construction was also saved from total collapse by public investments in infrastructure, especially in the road sector.

In Poland, the election year “cancelled” this slowdown

Jaroslaw Jedrzynski, expert of the portal, points out that the real estate market, like any other market in practice, is a cyclical market in which, after a period of prosperity, there comes a period of rather sharp economic stagnation. Slower.

In Poland, a slowdown after several years of prosperity was already announced in 2019, when demand slowed, signaling the beginning of lean years for the housing industry. However, it was also an election year. Then, among other things, after the announcement of the minimum wage increase, there were also other changes in the 500+ program (on July 1, 2019, the change came into effect, which assumes that the benefit is due to all children up to 18 years of age) – Editor's note ), not to mention other social transfers. Concrete funds and prospects for increasing the prosperity of Poles appeared on the market, and as a result the demand for apartments appeared again. He comments that the election year somehow “cancelled” the coming slowdown.

He adds that the rise in interest rates in 2022, in turn, led to an actual collapse in apartment sales. The arrival of a cyclical slowdown seemed inevitable. – Meanwhile, the announcement of “2% safe credit” caused another wave of recovery, the effects of which we can still see today, he points out.

According to him, the fundamental difference between Poland and Germany is that in Germany the inevitability of the real estate market cycle has been preserved. Therefore, the slowdown in the German market is essentially a natural phenomenon. On the other hand, the situation in Germany shows that the housing market is the driving force of every economy.

– Therefore, when there is a sudden collapse, the state can intervene to reduce the effects of the crisis – he emphasizes.

At the same time, the expert notes the drawbacks of this support.

The “2 percent safe credit” has typically been cut electionsThe program did not include any restrictions, and the result was that demand rose dramatically, as well as housing prices that rose by approximately 20%. However, due to the fact that wages in Poland have also increased significantly recently, it is difficult to talk about a typical bubble inflation phenomenon, he says.

Could the German scenario happen in Poland?

In response, Jarosław Jedrzyński drew attention to the alarming rate of increase in average apartment prices (in the capital they are heading towards about PLN 20,000 per square meter). Therefore, we do not rule out that we will also face a crisis situation that may lead to the bursting of the speculative bubble.

So far, thanks to state intervention, this scenario has been postponed, but this does not mean that it will not be necessary to confront it in the future. In addition, it must be remembered that the more individual stages of the real estate cycle are delayed due to interference in market mechanisms, the higher prices will be, and the more painful the collapse will be if it occurs. To be honest, there is something to be afraid of, seeing 2 and 3 percent more often. Increases in prices per square meter per month in major cities. These dynamics can inspire respect for the future prospects of our market – and he sums it up.

Agnieszka Zielinska, journalist at

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