“There is fear in housing construction”
In residential construction, more and more orders are being cancelled, and there are also increased costs for materials, but also for financing. According to the Ifo Institute, the climate in the industry is worse than it has been since 1991.
Scancellations, high costs and expensive financing: German housing construction is looking to the future with worries. The business expectations index for the industry fell to minus 65.6 points in February, as the Munich Ifo Institute announced on Monday. This is the lowest value since the survey began in 1991. “There is fear in housing construction,” said Ifo researcher Felix Leiss.
For some time now, orders in residential construction have been canceled much more frequently than before. 14.3 percent of the companies reported this in the current survey. A comparison with the years from 2012 to 2019 shows how high this value is, when it never exceeded 3 percent. And even at the peak of the Corona slump in 2020, the value remained in the single digits. However, this has changed since the first half of 2022.
“New business is suffering greatly from the significantly higher interest rates and the increased construction costs,” said Leiss. “On average, the order books are still well filled, but a number of companies are already complaining about a lack of orders.” Currently, 23.4 percent of the companies reported a lack of orders. A year ago it was only 9.5 percent. Last month, 6.9 percent of companies also complained about financing difficulties, compared with 5.5 percent in January and 3.1 percent in February 2022.
Number of building permits collapsed
The bad news from the construction industry has recently increased. In January, for example, the number of building permits for apartments fell more sharply than it had in almost 16 years due to higher interest and material costs. In January, only 21,900 apartments were approved, 26 percent fewer than a year earlier, as determined by the Federal Statistical Office. That was the ninth straight drop and the biggest drop since April 2007.
“The persistently negative framework conditions are showing their drastic effects,” commented the general manager of the Main Association of the German Construction Industry, Tim-Oliver Müller, on the development. The federal government must counteract this with stronger new building subsidies.
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