Construction prices in Germany rising at fastest rate in 50 years

With land in high demand, materials in short supply, and taxes going up, building is getting more and more expensive in Germany. Prices are currently rising more sharply than they have in over five decades. 

Building costs in Germany rise 12,6 percent in a year

Material shortages and a boom on the German housing market are fuelling the biggest price increase in building costs since 1970. According to new figures from the Federal Statistical Office, the cost of building conventionally manufactured residential buildings rose 12,6 percent year-on-year in August 2021. 

The last time such a strong increase was recorded was in November 1970, when prices shot up 13,1 percent compared to the same month of the previous year. 

The prices for structural work on housing rose by 14,5 percent between August 2020 and August 2021, with the biggest increase being recorded for carpentry and wood construction. The price for concrete work increased by around 15 percent, while costs for roofing and waterproofing rose by 14,5 percent, and for plumbing by 13,8 percent. 

What is causing the boom in construction costs in Germany?

Among other things, the price increase is currently being driven by skyrocketing demand for building materials like wood, steel and insulation worldwide. Prices for construction timber, for example, rose a massive 46,5 percent in August compared to the same month last year. 

The withdrawal of the temporary VAT cut is also making itself felt. Last year, to help mitigate the financial impact of the coronavirus pandemic, the federal government opted to slash VAT rates in Germany from July 1, 2020, to the end of the year. Since January 2021, the regular VAT rates have once again been in effect, making goods and services generally more expensive.