Europe’s great housing crisis – only starting

Friday 17 Nov 2023

In a leafy neighbourhood in Dusseldorf, Milena and Manuel David planned to break ground this summer on a new home, a milestone that was going to get them out of a cramped apartment where they share a bedroom with their two kids. But during the 16-month wait for a permit, mortgage rates had tripled and their building costs rose by €85,000 ($90,000). The couple crunched the numbers again before facing the fact that their dream of building their own home had collapsed as part of Europe’s worst construction crisis in decades.

Similar struggles are playing out across much of the continent. Residential building has tumbled as costs soar, while sluggish bureaucracies and increasingly stringent energy-efficiency regulations add to the headwinds. With housing already tight, the situation threatens to weigh on growth and further stoke political tensions as shortages squeeze more and more voters.

“I spent so many nights lying awake,” said Milena, a 37-year-old teacher, overlooking the overgrown shrubs and weeds where her kids were supposed to be playing. “What makes me angry is that we were so close.” The Davids were prime home building candidates. The family has two incomes, stable jobs in the public sector, and most importantly, they didn’t have to pay for their building lot, which was given to them by Manuel’s parents. Their struggles show just how broken Europe’s housing market is.

The hardest-hit countries are among the wealthiest. New building permits in Germany have fallen more than 27% in the first half. Permits in France are down 28% through July, and UK home building is expected to drop more than 25% this year. Sweden is suffering its worst slump since a crisis in the 1990s, with building rates less than a third of what’s deemed necessary to keep up with demand.

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Source: Bloomberg News

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