Germany's Property Sector: Explained and Troubled

Germany's property sector is facing a significant downturn as the era of cheap money comes to an end. The largest real estate group, Vonovia, has reported multi-billion euro losses, and construction job growth has stagnated. New construction and building permits have plummeted, while home prices have declined. The main factors behind the slump include rising interest rates, soaring building costs, weakened demand for office and retail space due to the pandemic, and concerns over the Ukraine war. The financial sector is also impacted, with BaFin monitoring property corrections as a top risk. Germany aims to build 400,000 apartments a year but is struggling to meet its goals. Various proposals, such as tax breaks, property sales tax suspension, and low-interest rate credit programs, are being considered to rejuvenate the sector.