Germany scraps plans for more stringent building standards to prop up industry

The German government will put on indefinite hold plans to require more stringent building insulation standards, environment minister Robert Habeck told Reuters, an effort to help prop up the ailing building industry.

The about-face from the German government comes ahead of a closely watched meeting between the building industry and government leaders with Chancellor Olaf Scholz on Monday to address a major slump in the sector.

Abolition of the insulation standards has been a top demand of industry, which says the measures are too expensive and put a further damper on the depressed construction industry.

“High interest rates and inflation are a heavy burden for the construction industry,” Habeck told Reuters, noting that the insulation measures now “can wait”.

“I don’t see this new standard being introduced in this legislative period,” he said. The period runs until late 2025.

For years, low interest rates fuelled a global boom, igniting interest in German property, seen as safe and stable as the country. A sharp rise in rates put an end to the run, tipping a string of developers into insolvency as deals froze and prices fell.

German housing prices fell by the most since records began in the second quarter, the latest grim sign for the property market in Europe’s largest economy, government data showed on Friday.

Also last week, data showed that building permits for apartments in Germany fell 31.5% in July from a year earlier, highlighting a slump in demand plaguing the construction and real estate industry.

Germany, whose population has recently grown as millions flock to the country, aims to build 400,000 apartments a year, but has struggled.

Weakness in commercial real estate in the United States as offices remain empty after the pandemic and the unravelling in Sweden of one of the country’s biggest landlords have globally called attention to distress in the sector. China has also seen major property builders struggle.

In the weeks ahead of Monday’s summit, the industry has been calling on the government for an aid package.

Among other measures, industry leaders are asking for an abolition of a sales tax on property transactions and a government-backed credit program to help borrowers offset high interest rates.