Construction costs are currently skyrocketing

There was a project almost 10 years ago to develop deep geothermal energy under Hamburg Wilhelmsburg. The targeted heat output at that time was just under 10 MW. And that was a 3000-4000m drilling.

However, you can largely forget about that due to the geological conditions in Germany. Aside from that, it is far too expensive to develop. But one is still allowed to dream, isn't it.

What would actually help us are long-term electricity storage systems that could make the excess energy from summer available in winter. I also do not see a decarbonization based on hydrogen solutions. Too uncertain and too expensive.

Surely, the required storage systems will be available at some point. But we are talking about decades here.

Already 20 years ago, there was speculation about mini combined heat and power plants in combination with photovoltaics, and at that time this was supposed to ensure the future energy supply for single-family homes. Nothing came of it either.

Unfortunately, the mistakes of politics are getting bigger year by year and now actually endanger prosperity and social peace in Germany.

I want to come back to how producer prices, consumer prices, and the key interest rate move in relation to each other:

[ATTACH alt="IMG_0177.jpeg"]82761[/ATTACH]

My thesis: In view of this data, further massive interest rate hikes are not to be expected. In fact, even the previous ones were not really sensible when looking at the temporal correlation of the movements.

So perhaps construction activity will slowly return in 2025? 2024 will be a dead year for real estate in my opinion.

The interesting question is whether we will see a peak in prices per square meter for new builds. What speaks for it, what against it? Any ideas?

(Source of the graphic: The blog relevanteoekonomik.de)

The rental prices indicate "currently 50m2 for 800 euros cold" then the shortage of skilled workers. And the increased cost of living, everyone grabs what they can.

I think that the new buildings will remain price stable. The price increases since 2019 have been really brutal. Construction prices, in my perception, increased by about 30% from 2019-2021 and by another 20% from 2021-2023. After a 50% price increase, it is almost certain that the peak has been reached in a virtually dead detached house new construction market. With still high material, labor, and energy costs, I see little potential for large price reductions (at most 5%). Because, from a historical perspective, single-family homes currently cost as much as they did in the 1990s. Back then, most people simply couldn’t afford a city villa with 200 sqm but built a detached house with 125 sqm. From 2012-2022, almost everyone could afford a house and most even a really large one (150 sqm+). That time is over now. Those were 10 exceptional years when buying and building could be done at a record low (except 2020-2022, when it really got brutally expensive).

The interesting question is whether we are seeing a peak in prices per sqm for new construction. What speaks for it, what against it? Any ideas?

I also tend towards sideways – it already seemed that the (extreme) prices of 2022 were still present in 2023. There was no more room upwards; downwards is difficult though. Presumably, the number of houses will now stay low over the years and people will hope for better interest rates. What definitely is happening – the "normal" houses in the 95 - 115 - 125 sqm category, which were previously completely out, are back and being actively advertised – sales argument: better small & mine than renting increasingly expensive.

Exactly. 120 sqm at 4% interest is now possible for anyone who could have built in 1990 as well. Just not any more and not for everyone anymore. As it was in the past.