Germany to Build Fewer Homes in 2026 Than 2025; Crisis Deepens
The Ifo Institute forecasts residential construction will plummet to just 185,000 completed units in 2026—the lowest level in over a decade and far short of the 400,000-unit annual target. The shortage will intensify rental pressure across the country.
Germany's housing shortage has entered a new crisis phase. The Ifo Institute only expects 185,000 completions in 2026, based on a forecast by the European research group Euroconstruct, marking a sharp decline from almost 207,000 apartments completed last year – fewer than at any time since 2012.
The paradox is stark: demand for new flats remains extremely high in Germany, where many cities are facing housing shortages and sharply rising rents, but the poor state of the construction industry can be attributed to high construction costs and other economic factors that have driven down building despite demand.
Why the Collapse?
- Due to a shortage of skilled workers, the average construction time has increased from 20 to 26 months
- In the German housing market, project costs and willingness to pay continue to diverge considerably in many cases. The numerous initiatives to reduce costs and speed up processes have not yet achieved the desired effect
What this means for you: If you're planning to stay in Germany and hoping that new construction will ease the rental squeeze, don't hold your breath. The government's target of 400,000 new homes per year is now practically dead. Rents will likely remain under upward pressure, especially in desirable neighborhoods. Budget for rent increases of 3–5% annually over the next three years, and secure long-term leases now while your landlord is still willing to negotiate. Consider suburbs and smaller towns as viable alternatives—they offer better value and still provide connectivity to major employment centers.
Sources
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