Just look at current numbers – 2% repayment, 20 years, 3.5% interest – existing property with realtor, project scope €750,000, around 160m² – leaving €200,000, €300,000 equity in there – it comes to over €500,000 loan amount, and €2,500 monthly. Plus the 160*€4 calculated operating costs by the bank, and that already adds up to a lot of money for housing – which should better be < 0.4 of the household income. So the example family would already need €8,000 net per month.
Certainly not the norm. There will need to be adjustments, either in the existing stock or later during construction – or hardly anyone builds anymore. Because even if a lot of money is available, why should it be squandered like in the times when money cost nothing? The competition has become massively smaller.
Of course, hardly anyone builds anymore, but that was already the case in recent years because there was hardly any available building land.
Besides, you probably live in an (expensive) metropolitan region. Not all of Germany consists of expensive metropolitan regions where acceptable existing properties cost €750k. Furthermore, €8k household income in such a metropolitan region is certainly not a rare income, even if it would probably already put you in the top 10% nationwide. Additionally, I would rather provide my free capital interest-free to my children/grandchildren than leave it at 1% in a savings account with 8% inflation.
Anyway, regarding older stock in energetically suboptimal condition, I am definitely with you. There will definitely be a correction, or it is already noticeable with us at least until energy prices return to a somewhat normal level.
Regarding new construction, I do not see this correction at all, why should I, because in my opinion there are still many more high-earning would-be builders than available plots. People here (Mainz region) still “fight” over great plots. Yes, even here some plots were returned in the new development area. But the waiting list was so incredibly long that these plots never appeared on the open market or were marketed by anyone.
Final remark: WE could certainly afford more than 40% for the rate with €8k. Does a family really "need" more than €4k to live on? In my opinion, no, and then €4k would be available for repayment. For that, you can still get something nice financed or built currently.