Why don't construction prices go down?

Area OWL. Earthworks add up to just under 20,000 euros for a house with a basement and a detached garage.

But the soil stays on your property, right?

But the topsoil stays on your property, right?

Topsoil yes, the rest is removed immediately.

Current information on the study situation:

Allianz study from November 2023 finds that homeownership is currently too expensive compared to renting:

Only if, in addition to the rent increases, property prices were to drop by 20 percent compared to 2022 – and thus by another ten percent compared to the current level – would buying a house be worthwhile compared to the return.

Kiel Institute for the World Economy (IfW) reports that the purchase price of existing properties is falling:

According to a study, prices for German residential properties fell in 2023 as sharply as they have not for at least 60 years. Condominiums became cheaper by 8.9 percent, single-family homes by 11.3 percent, and multi-family houses by 20.1 percent

(adjusted for inflation, naturally even more).

At the same time, the construction cost index is still rising (although now a bit more slowly). The BKI reports:

The construction cost index in the third quarter of 2023 was as high as never before; the index value was therefore 160.6 (2015 = 100). For comparison: In the third quarter of 2020, the index was still at a moderate value of 115.1.

Phew, almost 40%. I thought I heard of a study that described 2024 remaining a tough year for the construction industry. But from 2025, with slightly declining construction costs, things would improve again. However, I can’t locate the source right now (and this is certainly a misjudgment since the consensus here in the forum is that construction costs are not decreasing).

Undifferentiated conclusion: Better to rent and wait for a bargain from existing properties. New construction seems economically unattractive.

I see your conclusion rather the other way around. By now, even the very last person should be clear that you can't just keep running an unsanitary dump from 1970 as is. Unless you happen to be a universal handyman and know every cost-saving trick like nordanney, such a thing falls into the range of 1500-2500€/sqm. For that, the existing houses are far too expensive. Young used ones are rare and are not sold off at bargain prices, so not a real alternative.

I think one has to distinguish between existing and new single-family homes in these statistics above all. Because newly built single-family homes with high energy and equipment standards have definitely not dropped in price by 11%. Here in the region, such properties including the land are still often traded in the seven-figure range and regularly change owners. One hardly notices any slump there. However, the new construction boom is over here as well. Shell builders are fighting (in terms of price) for contracts. Our neighbor recently stopped his construction activities, sold his tools (basement formwork, machines, etc.), and prematurely quit his job (company) and is now retired. He only did shell constructions and said he didn't have a single order in the pipeline for this year. Otherwise, it was always 7-10 houses per year.

A major problem with new construction is the increased requirements. Just seeing the effort required to benefit from a KFW subsidy for families with middle incomes, one should not be surprised that no more is being built. Added to this is a new, absurd substitute building materials regulation, which achieves exactly the opposite of what it was actually supposed to accomplish.