Options for affordable new construction

In addition, the situation is complicated by uncertainties about future rent regulations, climate protection measures, urban development trends following Covid as well as the overall economic development and thus the solvency of home buyers and investors. In this report, based on an analysis of the prices of new flats, it was shown what possibilities there are to offer more affordable new flats. Furthermore, it was discussed how buyers and investors of newly built flats could be strengthened. These are the key findings of the study:

• Apartment size: Smaller dwellings are associated with higher prices per square metre, but lead to significantly lower prices per dwelling unit in absolute terms. One option for cheaper flats could be to build flats that are also attractive for shared flats, especially in the areas identified as particularly cheap. This could be especially interesting for young people studying, in training or starting a career. Shared flats for senior citizens are also conceivable. In general, not taking up space offers the greatest leverage for lower purchase and rental prices.
• Fittings: Price reductions of about 7 percent for rental offers and up to almost 15 percent for purchase offers were determined for simple fittings compared to the usual high-quality fittings. This also offers great potential, especially since simple fittings in new buildings often far exceed the typical standards in existing buildings.
• Building size: The results suggest that in new rental housing, buildings with 8 to 10 floors are generally associated with price discounts of 3 to 7 per cent compared to the reference of 2 to 4 storey buildings.
• Parking spaces: Not having an underground car park is associated with price reductions of around 4 to 9 percent.
• Basement: Doing without a basement is also associated with price savings of up to 2.5 percent.
• Building land prices: A reduction in the price of building land or its more favourable sale on public land by 10 percent is associated with a price reduction of almost 2 percent for purchase offers overall, but only about 1 percent in the cities and for rents.
• Building land: Without building land, new construction is generally not possible. The results of the empirical price model show that an additional 10 ha of building land is associated with a price reduction of 2 percent in purchase offers.
• Land transfer tax: A suspension of the land transfer tax for new buildings would be compatible with EU law and appropriate to strengthen new housing construction. Depending on the federal state, this would reduce costs by up to 6.5 percent.
• Demand: The measures announced by the federal government to increase demand are basically welcome. In particular, the special depreciation allowance in combination with tax-free sale after 10 years can create new incentives for capital investors, but the exact form of the home ownership subsidy remains to be seen.
• Social housing: Social housing is more than 40 percent cheaper than comparable privately financed new housing. Therefore, a considerable amount of subsidy is needed to make this cost-neutral. If this does not succeed, cross-subsidisation is necessary, which hardly seems possible in the current situation.