Why don't construction prices go down?

I observe the market a little, I have the feeling that only really below-average properties are coming onto the market.
That was already the case a year ago, but now it's even worse.
From that perspective, it doesn't matter at all whether prices fall or not. If there is a nicer house, regardless of whether old or new, always for prices of 800k€+

I am watching the market a bit, I have the feeling that only really below-average properties are coming onto the market. That was already the case a year ago, but now even worse. From that perspective, it doesn't matter at all whether prices fall or not. If there is a nicer house, whether old or new, always for prices of 800k€+

I can fully confirm that. The real estate situation, especially for buyers, is currently more than difficult at least in our area. We have also been observing the market for almost two years. There really is nothing on the market worth even a second glance. But that only represents our observation. The only help is to wait if you can.

Current status of the research situation:
An Allianz study from November 2023 finds that homeownership is currently too expensive compared to renting:

The Kiel Institute for the World Economy (IfW) reports that the purchase price of existing properties is falling:
(inflation-adjusted, of course even more).

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

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

Undifferentiated conclusion: Better to rent and wait for a bargain in the existing stock. New construction seems economically unattractive.

I suspect this will be difficult, or will just be waiting for Godot. Because in your compilation, a truly crucial topic is missing – there is nothing to rent, and rental prices are rising as strongly as they haven’t in years. And given the housing shortage, interest rates, and politics, there is also no realistic path that will change this in the next 3-5 years.
Prices in the existing stock may currently have already reached their bottom, inflation has already dropped significantly, and people are getting used to it. The situation certainly won’t get better, only different. Those who rent cheaply, do not have to fear termination due to owner’s own needs, and have enough space for future life situations may be able to wait – the rest will calculate sharply, and if possible, build smaller now.

The crucial question – what else would have to change for building to resume? Interest rates drop by another percentage point? Through KfW funding, young families have already received such a boost, they would already be on the market. And if the level generally falls, all those players will come back to the market who have so far been left behind and are renting at high prices. That then stabilizes and strengthens prices again immediately. Construction costs falling by 40% again? Rather unrealistic. Prices for land falling? You see more the opposite. And if it’s not paid, the land will simply remain unused until the next boom.

My also subjective conclusion – the best time to build is always yesterday, the second best is now. If at all possible, waiting does not pay off. Currently, one can obtain a plot and a general contractor on short notice. That never happened in the last 10 years.

I watch the market a bit, I have the feeling that only really below-average properties are coming onto the market.
That was already the case a year ago, but now even worse.
In that respect, it doesn't matter at all whether prices fall or not. Whenever there is a nicer house listed, whether old or new, always for prices of €800k+

I share the observation, but I don't see a trend in it. In our market observation area (about 10x10 km between Düsseldorf and Bergisches Land), there were regularly around 50 single-family houses listed until 2022 (excluding new construction projects). By mid-2023, it rose to 120 and now is back to about 90. The notification emails have not become more frequent than in 2022. So the houses are simply listed for much longer, often 6-9 months.
Whenever a house that I specifically monitored disappears, I occasionally go by there in the following weeks and also talk to the neighbors. Surprisingly, I often learn that the sale was stopped because no buyer was found – and they want to try again in a few months. The house then remains unoccupied and unheated in the landscape.
Sometimes the houses come back on the market with another agent. Or as self-marketing.

But regarding the first point of your statement: I can't see that the proportion of young or fully renovated houses has decreased. It remains steady at 5-10%. But that is also the nature of things; who would sell such a house? At most, such houses come on the market due to divorces or (even rarer) job-related relocations.

Just a few examples here from the area
"Architect's house in an idyllic location" (= really in the middle of nowhere), 180 sqm, built in 2019
originally listed for 850k, now reserved at 699k. Was listed for about a year

Bungalow with unfinished attic, 140 sqm, 1989, 210 kWh/sqm
Originally listed for 485k, reduced several times then disappeared. Now listed under a new agent for 369k and marked as sold

Such things only come on the market in the case of divorces or (even rarer) job-related moves.

There is a third variant. Retirees who build for old age and then after a few years realize they are no longer fit enough or simply no longer alive.

This is a catchy phrase that the best time to build was yesterday and the second best is today. But we are currently in a black swan area. A study from early February, which I only came across today:

Federal Institute for Research on Building, Urban Affairs and Spatial Development:
Construction prices are falling
2022 +16.4%
2023 +8.5% (with falling energy prices and end of material shortages)
Forecast:
2024 -3.2%
2025 -5.5%
2026 -0.9%
2027 0.2%
2028 2.0%

It seems to be about nominal values; in real terms, the price decline should be higher than forecasted.

* If you invest your own equity: last year there was about 20% to be gained in the S&P500. With interest rate cuts, the return should be correspondingly above average.
* Interest rates are about 1% down.
* Availability of craftsmen is improving.

Just as previously interest rates went up and the overvalued stock markets went down, now it is going in the opposite direction. This is a very dynamic market. The construction/real estate market is very sluggish by comparison (order backlog; project durations; that's why prices continued to rise even when the party was actually already over).
Just as in 2022/2023 everything negative came together (interest rates up due to inflation, overvalued stock markets down, material shortages raised construction costs and subsidy cuts), a window is now opening in which favorable factors coincide for the builder.

My (this time somewhat more nuanced) conclusion: Taking all these points into account, building tomorrow (2025) could be considerably cheaper/more pleasant than building yesterday (2023).