New construction of conventionally manufactured residential buildings rose in May by 8.8 percent compared to the same month last year. According to the Federal Statistical Office, this is the smallest increase since spring 2021. Last February there was an increase of 15.1 percent. From February to May, construction prices increased by 0.8 percent.
“You can certainly see a certain glimmer of hope in the data, but no real all-clear signal yet,” said Elmar Völker, economist at Landesbank Baden-Württemberg (LBBW). The lower increase is probably related to a base effect: the prices are now being compared with those in spring 2022, when many raw materials and energy had become much more expensive as a result of the Ukraine war. The weakening demand due to many cancellations as a result of increased material and interest costs could also have had a dampening effect. “The main drivers now no longer seem to be the material costs, but rather the personnel costs,” said Völker. The shortage of skilled workers in this sector is likely to inhibit the relaxation of prices.
The German Ifo Institute also expects a decline in residential construction due to the sharp rise in costs. The researchers predict that only around 245,000 apartments in new buildings will be completed in Germany this year and only 210,000 in 2024. In 2025, together with the other completions, there should be around 200,000 residential units. The German government’s goal is 400,000 apartments.
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