Germany has long benefited from meager borrowing rates, leading to a real estate boom that has lasted for a decade, Invest-Gate reports.

Germany’s largest real estate group, Vonovia, has recorded losses and decreased asset value amounting to billions of euros. Accordingly, employment opportunities for construction workers are experiencing an unprecedented slump.

Germany is crucial as it is the largest economy in Europe and the continent’s biggest real estate investment market. The real estate sector accounts for nearly one-fifth of the country’s gross domestic product.

According to the German Real Estate Association, 10% of the country’s workforce is employed in the real estate sector.

New construction activities in Germany declined by 47% in the 2023 H1 compared to the average of 2022 and 2021. Moreover, new building permits dropped by 27% during the first five months. Housing prices also saw their largest decrease in the first quarter since the German statistical office began keeping records, with a 6.8% decline from 2022.

The main factor behind these developments is the sudden and rapid increase in interest rates by the European Central Bank, as it continues to attempt to curb inflation, which reached its highest levels in decades under the leadership of Christine Lagarde.

Also, construction costs rose, and the demand for office spaces and retail stores diminished after the pandemic.

Germany, which has recently seen its population grow with the influx of millions of migrants and refugees from Ukraine, aims to build 400,000 apartments annually but is struggling to achieve its target.

Politicians, ministries, and heads of real estate companies are expected to meet with Chancellor Olaf Scholz on September 25 to attempt to find solutions and discuss proposals for revitalizing this sector.

According to the specialized data analysis platform “Statista,” investments from the Middle East accounted for approximately 30% of Germany’s total residential real estate capital in 2020.