Why don't construction prices go down?

At the moment, you’re right. But let’s wait and see how it looks in a year. I’ll just say car manufacturers as a keyword. During the pandemic, they hardly gave any discounts and even raised prices significantly by up to 20%. And when demand dropped, prices were lowered again and more discounts were given. Some might have found that hard to imagine.

The problem with your comparison – an industrial mass product that is well substitutable new from abroad and used domestically – is compared to a quite individual factory contract product. And this in a market where demand is high and supply is tight.
At a different (lower) interest rate level, it is quite clear that the price turbo would ignite again. Additionally, the backlog of companies is already running out – if they wanted to realize follow-up projects with discounts, we would see them by now. Municipalities that developed building areas at old prices will hardly reduce prices; new projects will hardly become cheaper alone because of all the regulations, especially since many with still scarce building land do not have to sell at any price. What really happens – slimming down luxury, reducing size. Instead of 160m² at entry level, there are now 90-120m² new settlement houses.

This will now establish a new “normal” – nowhere near the scope of the past and also not at the level of the federal government’s dream figures. But ultimately, most current publications are marked by exactly this tenor – interest rates will remain, prices in the renovation sector are low, plateau reached, prices for (almost) new construction are high but still in demand without much price drop due to their rarity. Not everyone can build anymore, the industry will have to adapt.

The problem with your comparison - an industrial mass product, which is easily substitutable new from abroad and used domestically, is compared to a rather individual factory contract product.

Bricks, floor coverings, fittings, etc. are also industrial mass products. Long-distance transport is naturally only conditionally economical for some building materials. On the other hand, many gravel plants have probably made a fortune precisely because of the lack of alternatives.

Certainly, material prices will decrease. Construction is currently a dead horse.

Those who build and buy themselves can certainly purchase more cheaply, even very cheaply. There are many bankruptcies and surpluses, warehouses are overflowing, and liquidity is needed. So dealers and manufacturers will part with goods cheaply.

For me, someone with equity and manpower, better times are now beginning again. Finally.

Just last week I made a bankruptcy purchase again. Wallpapers, PVC covering, click PVC. Top goods at bargain prices.

Marburg non-woven wallpaper. 200 rolls for 20 cents each. The retail price used to be 21.95 euros per roll. Click PVC at 3 euros per sqm.
So things are already moving again.

Now I can also renovate my rental apartments super cheaply again.

An acquaintance who builds houses on a small scale told me that he constructs a shell (2 stories) with slab, ceilings, etc. for 100,000 euros. Solid construction of course. That's still actually feasible.

Thank you for the information. Construction will definitely start in about a year for us. Let's wait and see..

Such items are of course great if you are quick and flexible. Sure, I also bought a special item from the plumbing store for a bathroom and ended up costing less than the standard even though it was the luxury piece. But you have to be that flexible first. Take a look at the discussions (also here): It has to be EXACTLY THAT tile and no other. Well then, it's list price.

Such items certainly exist occasionally for small interior finishing batches. Wallpapers, tiles, paints, small quantities that no craftsman even raises an eyebrow at. I experienced it at the beginning of the Corona crash, when a plumbing company quickly built a new warehouse because the wholesaler threw out huge quantities of standard goods for free. Then they were quick, the craftsmen with capital and storage space, because pipes are always needed. For interior finishing or renovation, such an item can massively reduce costs, no question. But much from new construction will not end up in such special items or not in the right quantity. As a private person, you have no follow-up projects where you can use up the leftovers. Sure, if I pay only 20 cents per roll of wallpaper, I’ll just throw away 100 rolls if I only need 100. But when it comes to plumbing materials, it becomes almost impossible to get exactly the right material for the project.

Prices will not fall significantly. They might stagnate, yes. But where should the price go down? CO2 tax, rising wages, expensive energy. Toll is expensive. If capacities in the market are too large, quantities will be reduced. But not the prices. Never.

Of course, this is absolutely wrong from an economic perspective. On the one hand, a pure capacity reduction is costly because the contribution margin per unit always increases. Therefore, it only takes one player—assuming a sufficiently transparent market—who lowers prices, and the scarcity strategy almost inevitably leads to insolvency. On the other hand, this extrapolation of rising costs into the future is simply speculative. Wages can decrease, and material costs in a globalized economy depend only to a small extent on domestic demand. In the end, no one can validly predict what will happen next. The real estate market is no safer to assess than the stock market—on the contrary, because it is much less transparent. And even in the stock market, the saying "timing is impossible" applies.