By Tom Sims, John O’Donnell and Matthias Inverardi

FRANKFURT (Reuters) – German Chancellor Olaf Scholz is launching a fresh bid to tackle a property crisis as the country braces for recession and elections that could bolster the far right.

The government has scheduled a meeting of politicians, ministries and industry representatives in Hamburg on Dec. 6, two top industry officials said.

The meeting will address the housing shortage in Europe’s most populous country, one exacerbated by the failure of major developers and a crash in investment and financing as real estate prices slumped.

The last such gathering in September produced a raft of government proposals but little concrete action.

“It shows something is happening,” Iris Schoeberl, president of the German Property Federation representing 37,000 firms, said of the renewed effort.

“It also sends a strong signal to the people that the chancellor is tackling the issue.”

Tim-Oliver Mueller, head of the German Construction Industry Federation, lamented that “much of what was discussed previously has come to nothing”.

“We need concrete steps and real action,” he said.

Germany’s 730 billion euro property industry contributes a fifth of the country’s output, eclipsing its auto sector.

Industry leaders have been pushing for changes including a cut to Germany’s property sales tax, which can be 6% of the price of a home, and relaxing rules to make it cheaper to build.

The government didn’t respond to a request for comment. The housing ministry said it was working to support the industry with measures such as speeding up the building approvals process.

For years, low interest rates and a strong economy fuelled a German property boom, which ended in 2022 when rampant inflation forced the European Central Bank to swiftly raise borrowing costs.

The ensuing funk resulted in a slowing of deals, stalled projects and top developers going bust. Recent data still shows an accelerating fall in building permits for apartments, and another plummet in new building starts in the first half of the year.

While the ECB’s June rate cut sparked hopes of a revival, executives remain cautious.

Rolf Buch, chief executive of one of the nation’s biggest landlords Vonovia, which reported another loss for the first half of the year, predicts more property companies will go bust.

Germany has failed to meet its goal of building 400,000 apartments a year as millions flock to the country to escape wars and in search of work.

The far-right Alternative for Germany (AfD), which has campaigned for policies to support housing, has a chance of winning state elections later this year as the popularity of Scholz’s three-way coalition slips ahead of a 2025 federal vote.

“The housing shortage can lead to populists increasingly taking up the issue with supposedly simple answers,” warned the German Property Federation’s Schoeberl.

Scholz, who is regularly confronted about the lack of affordable housing, told one gathering in Mainz earlier this year: “We must find a way so that housing goes up where it is sought and needed.”

After spending tens of billions to tackle the energy crisis and boost defence spending, Germany has little left for the property crisis, with Mueller also blaming fragmented responsibility between the federal government and the 16 states for hobbling a response.

Felix Pakleppa, chief executive of the ZDB industry association representing 35,000 building firms, said there should be subsidies and fewer energy-related regulations.

“We in Germany have become accustomed to the gold standard for technical building specifications, which has made construction projects ever more demanding and costly,” he said.

Since the September meeting, the drumbeat of bad news has continued, with the collapse of Rene Benko’s Signa real estate empire, which had a major footprint in Germany, one of the more notable failures.

Some banks have also come under stress while a Frankfurt skyscraper home to Germany’s central bank and asset manager Deka filed for insolvency. Apollo-owned Demire also said four subsidiaries will file for insolvency after its bank refused to renegotiate a loan.

Schoeberl, meanwhile, is pushing for measures to allow developers to build quickly, and for consistently low interest loans from a government-backed bank.

“What real estate needs is trust and the ability to plan,” she said.

(Editing by Kirsten Donovan)

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