That’s why building a house will be even more expensive this year
That's why house construction will be even more expensive this year – Image: © Watchara #298701901 – stock.adobe.com
Who hoped for the year 2022 for a decrease of the real estate prices, was bitterly disappointed. High demand confronts low interest rates.
In addition, there has been another price driver for some time now. The talk is of building materials, which are in short supply and therefore also becoming more expensive.
Higher construction costs in the double-digit range
A recent survey shows how much builders are affected by high construction costs.
Three out of four respondents who had recently taken out a construction loan through the provider emphasized being strongly or very strongly affected by the higher construction costs.
Most respondents said that their construction project had increased by ten to 20 percent due to rising prices. One in four had to dig even deeper into their pockets.
Supply bottlenecks as a frequent reason
Price increases for wood in particular cost homebuilders dearly. Less noticeable was the impending shortage of glass or insulation material. One in two also pointed out that delays in individual construction phases occurred due to supply bottlenecks.
In addition the scarcely half of all asked ones stressed that in the apron planned projects such as a solar plant, a chimney, a Carport or a garage for cost reasons for the time being to be put on ice.
Higher energy prices and labor costs
This trend will become even more pronounced this year. The price spiral turns even further upwards. In addition, prices in the construction industry itself are rising steadily. Additionally, rising energy prices are leading to higher costs for concrete and steel. Furthermore, the increase in statutory minimum wage causes higher labor costs.
However, it is equally important for builders not to ignore interest rates on construction costs.
Instead, real estate loans that have so far remained relatively cheap will become more expensive over the course of the year. The recent rise in construction interest rates triggered by the Corona uncertainties will most likely continue to increase.
Rising interest rates are likely
At the beginning of 2022, Interhyp asked ten lending institutions independently of each other. All institutions anticipated rising real estate interest rates this year. Currently, the interest rate is about one percent.
For 2022, it is predicted that construction interest rates will increase noticeably by several tenths of a percentage point. Currently, an interest rate increase of 0.25 to 0.5 percent can be assumed.
Advantages of loans with a long fixed-interest period
Who would like to profit from the current favorable building interest rates, should decide for a loan with a long interest period for up to 20 years. This period would protect borrowers from having to pay higher interest rates.
In view of any delays that may arise, another deadline plays an important role for builders – the provision interest-free period. During this period, banks hold the agreed loan amount available for drawdown without charging further interest.
If the banks agree to the relevant regulations, this period could extend to up to 24 months. However, the biggest challenge for home builders and property owners is still generally to raise sufficient equity for the house construction project.