Slowing Down the Housing Market? A Look at the Potential Impact of Infrastructure Investments
Construction of housing projects potentially delayed due to diversion of funds towards infrastructure projects.
The chatter in the real estate world is heating up: the new government's infrastructure plans might have a significant impact on the housing market - for better or worse. The question on everyone's mind is whether infrastructure spending will speed up the construction of new homes or cause construction to slow down due to mounting demand for workers and materials.
Let's take a deeper look at the implications of this overlapping of housing and infrastructure investments.
Craft and Demand: Construction expert Huber), says that a possible slowdown in housing construction would be a systemic failure. The increased infrastructure spending may drive more contracts to the construction sector, causing an upward pressure on costs. Even with more projects headed towards civil engineering companies, there's still a risk of capacity being drawn from housing construction, Voigtlaender warns. Workforce in the construction sector is currently only operating at 70% capacity, significantly lower compared to pre-2021's almost full utilization.
Economic Factors: Voigtlaender is of the opinion that it's up to the government to ensure housing construction gets a boost before this situation arises. Increased support for self-builders and private builders through higher subsidies, expanded tax benefits, reduced real estate transfer tax, and lower down payment options could help encourage more people to build or renovate right now, instead of delaying their home purchases.
On the flip side, easing requirements for energy renovators might encourage existing homeowners to invest in energy efficiency upgrades, keeping construction workers employed and preventing skilled workers from jumping ship to infrastructure projects. However, it's essential that the funding for energy renovation programs is clarified, avoiding the uncertain "back and forth" of the previous legislative period.
Market Trends: Despite infrastructure investments, the construction industry is expecting a negative growth rate in 2023. Stefan Münter, CEO of financing platform Europace, comments that the focus will likely continue to be on existing properties due to current market trends, with modernization being a future topic that the infrastructure package won't substantially change.
Source: capital.de
Topics:- Housing Construction- Real Estate- Infrastructure Spending- Government Policies
Insights:
- Infrastructure investments, while primarily targeting civil engineering projects, could have indirect benefits for housing construction by improving connectivity and reducing transportation costs
- The government's priority on affordable housing, planning reform, and incentives could create a favorable environment for developers and homebuilders
- A focus on energy efficiency and renewable construction could lead to more incentives for renovators
- Clear and consistent funding policies for energy renovation programs are crucial to encouraging long-term planning and action among homeowners and property buyers.
The community and employment policies should be aligned with the infrastructure investments to ensure a steady supply of workers for the construction sector, as the increased demand for workers and materials might cause a slowdown in housing construction due to their diversion to infrastructure projects.
The government's policies, such as higher subsidies, expanded tax benefits, reduced real estate transfer tax, and lower down payment options, can help stimulate housing construction and prevent skilled workers from moving towards infrastructure projects.
