Anyone who builds today needs strong nerves. Interest rates are rising, there are no skilled workers and there is also a lack of material. If you try, you also need a bit of luck – and a financial buffer.
Cologne – The fact that Vladimir Putin invaded Ukraine on February 24, 2022 came just in time for Burkhard and Manuela Frey. Sounds macabre, but has a very practical background. At this point, Frey and his wife are converting a house and have an important contract – for gas heating. “A few days later and we would have actually made the biggest mistake of our lives,” says Burkhard Frey. A heat pump is installed weeks later. This is more climate-friendly and avoids the uncertain gas supply. But above all, it is also much more expensive.
The incident from a small town in central Hesse near Gießen shows on a small scale what home builders need on a large scale: flexibility, reserves – and good nerves. “For example, we bought steel exactly when the price was at a record high. Now we would get it for half the price,” says Burkhard Frey. Expensive building materials alone have increased the costs by a third. Steel, wood, brick, insulating materials – everything has become more expensive.
The couple had imagined everything so beautifully. Their three children have moved out, and Burkhard Frey gave up his agricultural business last year. And only a few meters away from her current residence is the house where Manuela Frey grew up – large garden, beautiful location, quiet area. They are now rebuilding it for themselves. Freys originally wanted to invest 300,000 euros in the building. A sum that will later double. Partly because they are expanding their conversion plans, but mainly because prices are skyrocketing.
“It is currently impossible to build affordable housing”
This is underlined by current figures from the Federal Statistical Office. New construction of conventionally manufactured residential buildings rose in November by 16.9 percent compared to the same month last year. In May, the increase was even 17.6 percent – prices have not risen so rapidly for 50 years.
Whether shell construction, concrete, masonry, roofing or roof sealing work: In almost all areas, the cost increase is double-digit. “It is currently impossible to build affordable apartments in Germany,” says Matthias zu Eicken from the “Haus und Grund” owners’ association. Because there would be other cost drivers in addition to the more expensive raw materials: Supply chain disruptions as a result of Corona and price increases from the energy crisis. “Low interest rates compensated for this for a long time, and those times are over now,” says zu Eicken. Politicians agree across party lines: much more needs to be built.
Falling real estate prices, rising interest rates
Freys financed the costs of their retirement from various sources. On the one hand, there is the house in which they live now, which is in need of renovation and which they would like to sell. The problem: house prices are falling. 380,000 euros is in the ad – more hope than realism. “A year ago we would have gotten ten percent more. I’ll be happy if we sell it for 360,000 euros,” says Burkhard Frey.
Freys financed part of the costs, a total of 175,000 euros, with a loan. So far, so usual. However, the current interest rate development was not to be expected. This also affects the couple, because they have agreed on a variable interest rate. This means that the amount is based on the key interest rate. And it only knows one direction at the moment: upwards. “We pay 3.3 percent interest. Luckily we can redeem our loan for free. We don’t have any early repayment penalties,” says Burkhard Frey. So you could pay off the remaining debt at once. He omits one variable in this consideration: Your house would first have to be sold. “A neighbor has also advertised his house – but in the current crisis situation, all interested parties have jumped off,” admits Frey himself.
Craftsmen are missing: “Alone we would be completely lost”
But there are much more pressing problems right now. For example: find craftsmen. “We were very lucky that our architect is well connected. We would be completely lost on our own,” says Burkhard Frey. What many should not have on the screen: The poor current condition is also an additional risk for the future, warns construction expert Eicken. “There is a risk that if there is a real standstill in housing construction, skilled workers will be cut, which we will urgently need in the future to achieve our housing construction and climate protection goals.”
Speaking of climate protection. Building and climate – there was something there. After all, around 40 percent of global Co2 emissions go to the bad bank account of the construction sector. This is one of the reasons why Freys did not build new, but converted an existing house to be energy-efficient. Renovation instead of new construction: Environmental activists have been calling for this for a long time.
Overdue subsidies: “I haven’t received a single cent yet”
Burkhard Frey appreciates the strict energy requirements. But: “Then I want to get the state funding,” he says. “So far I haven’t received a single cent.” Subsidies of 100,000 euros are overdue. “We built everything the way the state-mandated energy consultant suggested: from insulated front doors and heat-proof windows to heat pumps and solar systems.” In the long run, only people who have reserves can sustain it financially. Freys have them. “Thank God – otherwise the project would have died long ago,” says Burkhard Frey. “I keep hearing more and more stories of people giving back their building sites.”
When Freys can actually move is written in the stars. “I’ve stopped giving a specific date,” says Burkhard Frey. The most recent example: “There were no hooks to attach the solar panels to the roof. They lay in some container in Shanghai for weeks.” A special part from China that is paralyzing a construction site tens of thousands of kilometers away in central Hesse: Building in Germany in 2023 can take a while.
Actually, that time is not here.
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