Bauarbeiten sind im Quartier Heidestraße in Mitte in der Nähe des Hauptbahnhofs im Gange. Das Statistische Bundesamt veröffentlicht am 25.11.2021 Zahlen zum Bauhauptgewerbe im September 2021. +++ dpa-Bildfunk +++

New housing construction in Germany collapsed massively. More than forty percent of the residential units planned from 2023 are subject to cancellation due to the current framework conditions, are being postponed or cannot be realized as planned.

This is the result of a current survey by the Federal Association of Independent Real Estate and Housing Companies (BFW), the results of which are exclusively available to the Tagesspiegel. “This is not a dent in the new building, this is the full braking of an entire industry,” said BFW President Dirk Salewski in Berlin. The companies surveyed state that they are planning a total of 19,665 residential units from 2023.

“There is increasing feedback from companies on order cancellations,” says Felix Pakleppa, General Manager of the German Construction Industry Association. After evaluating a corresponding survey, the Munich Ifo Institute also reported that an unusually large number of projects are being canceled in the German construction industry at the moment. The magnitude is comparable to the shock in spring 2020 caused by the outbreak of the corona pandemic.

If the construction of multi-family houses for socially weaker classes does not progress, this is of great socio-political explosiveness. The energy policy goals for the energetics of the German building stock, which were of particular importance as a result of the Ukraine war, are also being pushed into the distance. Only six percent of the companies participating in the BFW survey 123 also want to apply for the KfW40 QNG subsidy for sustainable buildings; 45 percent of the companies surveyed even denied planning with these funds. In housing construction, there is uncertainty about future funding opportunities, writes the Ifo Institute. The companies surveyed state that they are currently building 18,425 residential units; half could be funded.

Meanwhile, material supply bottlenecks are leading to rapid price increases. The high energy prices are also a burden. Producer prices for wood, steel and insulating material are particularly affected. These building materials are particularly relevant for new residential construction, which is important from a socio-political point of view. Even before the start of the Ukraine war, producer prices for solid structural timber and construction timber were at an all-time high due to the pandemic and high demand from the USA. Structural steel and insulating materials, which are essential for achieving the energy-related requirements in residential construction, are hardly affordable anymore. The current construction price indices for residential buildings (new construction, conventional construction) and for road construction (engineering) from the Federal Statistical Office are pointing steeply upwards. In May 2022, construction price increases for new residential construction increased by 17.6 percent compared to the previous year. “The price development for building materials and rising financing costs are now partially slowing down project planning and implementation,” says Pakleppa. The companies surveyed by BFW state that they have price increases of 19 percent on average.

After all, according to Ifo, the average order books are still full. “Craftsmen can hardly save themselves from orders, but the material is scarce,” says the Berlin broker Achim Amann, Managing Director of Black Label Immobilien and board member of IVD Berlin-Brandenburg: “Due to the geopolitical situation, there will be little improvement here in the short term.” As a result, executing companies get into a tight spot; they pass these costs on to their public, commercial and private builders. “Today, we have to reckon with costs of around 3,000 euros per square meter for a new building,” says Amann, “so around 450,000 euros are needed for a single-family house with 150 square meters of living space, plus building land and ancillary costs. But monthly installments of well over 2500 euros are hardly representable for most buyers. In the middle segment, we are therefore currently experiencing many cancellations by builders and project developers. New projects are practically no longer realized.” Demand is also falling dramatically. 74 percent of the BFW member companies surveyed noticed a drop in demand.

In the construction of one and two-family houses, building permits are falling massively. From January to May, a total of 135,133 apartments were approved for new residential buildings to be constructed, 1.5 percent fewer than in the same period last year. According to the Federal Statistical Office, there was a significant drop of 17.8 percent to 34,809 for single-family houses. The number of building permits is an important indicator of the housing shortage in many cities. Should this trend continue, “we will soon see a deep dip in the construction industry,” Pakleppa warned.

70 percent of the member companies surveyed by the BFW state that they will no longer implement half of the planned projects under the given framework conditions. Extrapolated, this means a decline of between 50,000 and 75,000 new apartments, according to the interest group. The federal government’s goals of 400,000 new apartments per year are not even remotely achievable.

In addition to the sharp rise in construction prices, there are also real estate prices (both for building land and for existing properties in need of renovation), which have also risen sharply, and the significantly higher interest rates. New construction projects are therefore being postponed for the time being. The time shift, i. H. putting off planned construction projects is one thing. It becomes very precarious for public, commercial and private builders when construction projects that have already been commissioned exceed the budgeted cost limits. According to the Ifo Institute, the proportion of companies affected by the cancellation of construction contracts was 11.5 percent in June 2022 and 13.4 percent in May 2022. In civil engineering, nine percent of construction orders were canceled in June 2022 and 8.8 percent in May.

Is that just how it works – cancel? The term “Storno” comes from Italian and is not a legal term. Stornare is Italian for “to undo”. Accounting understands this as the reversal of an incorrectly posted business transaction. The German Civil Code (BGB) and the VOB/B (procurement and contract regulations for construction work) do not know the harmless-sounding term. Rather, a precise legal distinction must be made.

From a legal point of view – and this is what matters – the unilateral withdrawal from the construction contract usually has costly legal consequences for the client. Orders placed by the client are binding contractual offers or contract acceptances. They lead to an effective contract with the contractor when they are received by him. A revocation is no longer possible after receipt.

The only exception to this is the non-certified consumer construction contract, which can be revoked by the consumer within 14 days of its conclusion. Apart from this exception, the cancellation of a concluded BGB or VOB/B construction contract by the client constitutes a termination. It is important to be particularly careful at this point. Because terminations of BGB or VOB/B construction contracts without a reason for termination are regularly expensive for the client. If the client terminates the BGB or VOB/B construction contract unilaterally without any reason for termination, he must pay the contractually agreed price in full. Only the expenses saved by the contractor will be deducted.

Expenses saved by the contractor are those costs that the contractor no longer has due to the premature termination of the contract. This is, for example, the material that has not yet been installed at the time of termination if it can be used for other purposes by the contractor. Furthermore, the personnel no longer required if they can be employed by the contractor on other construction sites. If the expenses saved cannot be specifically quantified, the BGB assumes that the contractor is entitled to five percent of the remuneration for the part of the work not performed. The VOB/B does not know such an assumption.

The situation is completely different if the client terminates a BGB or VOB/B construction contract for an important reason, i. H. with reason for termination, terminates: In this case, the client only has to pay the contractor for the services rendered up to the time of termination. The customer does not owe the – often expensive – remuneration for the services no longer rendered by the contractor.

The question now is: do the considerable construction price increases, which the contractor passes on to the client, justify a reason for termination for the client? Here, too, a differentiation must be made: If a fixed price is agreed in the BGB or VOB/B construction contract, then the contractor cannot usually pass on his material, fuel and other energy costs to the client. If the contractor nevertheless tries to do so illegally, the client must fend it off. This does not justify a right of termination for an important reason for the client. That’s the theory.

In practice, many construction contracts now contain escalation clauses. The contractor reserves the right to pass on the increase in material costs to the client. The contractor is then contractually entitled to increase the prices. Many construction price increases also result from (justified or unjustified) additional requests from the construction companies. A particular cost trap for the client are gaps or ambiguities in the building specification.

These gaps or ambiguities are being looked for with particular meticulousness by contractors right now. If the contractor is entitled to increase the contractually agreed construction prices due to such circumstances, this does not give rise to an important reason for termination for the client – and this is relevant. If the client nevertheless terminates the construction contract due to the price increase, he must pay for the entire agreed services, regardless of whether they have been rendered or not. Only the expenses saved by the contractor are deducted. This is usually very expensive.

What to do? In this situation, the client can, instead of terminating the contract, try to reach mutual agreement with the contractor to cancel the contract. This is often possible. Because increased material prices, high fuel and energy costs as well as increased interest rates and building land and used real estate prices are a burden on contractors and clients alike. An amicable termination of the construction contract is often sensible. The client will often have to make additional payments here. However, these are regularly cheaper than the payment claims of the contractor after a simple termination by the client without a reason for termination. Clients and contractors are also required to regulate the issues of crises and war as precisely and balanced as possible when concluding new construction contracts.

Public, commercial and private clients must also – if at all possible – continue their construction activities, especially in the construction of new homes. “For years we have been building far too little and often the wrong thing,” tweeted BFW President Salewski: “BR (Federal Government, ed.) stops all funding programs, federal states are complicating the building regulations and municipalities are not designating any building land, but everyone is surprised that prices and rents are rising. Weird learning curve.”