As of: March 28, 2024, 5:01 p.m
By: Lisa Mayerhofer
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An upswing in the construction industry is not expected any time soon. The new building is probably particularly affected. (Symbolic image) © Hauke-Christian Dittrich/dpa
The construction crisis is becoming increasingly widespread – and there is no end in sight. Experts see a wave of bankruptcies in new construction and an acute housing shortage.
Berlin – Things are getting worse: The crisis-ridden German construction industry continued its downward slide at the beginning of the year, mainly due to weak demand for new apartments. New orders in the construction industry in January, adjusted for inflation (in real terms), were 7.4 percent lower than in December, as the Federal Statistical Office announced on Monday (March 25). Sales also fell significantly: in real terms they fell by 5.3 percent compared to January 2023. The Main Association of the German Construction Industry (HDB) spoke of a “weak start to the year”.
Construction crisis: “The uneven development in the construction industry continues at the beginning of the year”
This was primarily due to residential construction: orders here fell above average by 17.8 percent in January. A rapid turnaround is not expected given the recent sharp decline in building permits. Building construction as a whole - which, in addition to residential construction, also includes the construction of factories or administrative buildings - reported a real decline of 12.0 percent compared to the previous month. New business in civil engineering, which also includes state-dominated road construction, shrank by 3.1 percent at the beginning of the year.
“At the beginning of the year, the uneven development in the construction industry continued,” said HDB Managing Director Tim-Oliver Müller, commenting on the development. “On the one hand, the still disastrous situation in housing construction and, on the other hand, compensating for major projects in civil engineering, where railway and cable line construction are located.” The latter achieved an increase in orders of 20 percent.
Financing advisor: “I believe that we are only at the beginning of the wave of bankruptcies in new buildings”
So is it better now not to buy a new apartment or house? Birgit Weber, financing consultant at Pasch & Kruszona in Krefeld, recommends at
Focus Online
that “we continue to look at the real estate market” due to the continued sharp rise in rents and the latent housing shortage. It also reminds us of funding opportunities such as the KfW home ownership program or through BAFA.
However, she advises those willing to buy to buy a used property rather than a new build. “It's best to have a 'young' used property, as the risks such as insolvency of the developer, timely completion, double burden due to construction time or additional financing due to additional costs are significantly lower than with a new building,” Weber tells the news portal.
Bankruptcies are a particular problem: “I believe that we are only at the beginning of the wave of bankruptcies in new construction. Properties that have not yet been sold and have not yet been completed as of the beginning of 2022 are severely affected. Rising interest rates and construction costs have made the new construction market unplannable for companies,” said Weber to
Focus Online
. She further explains: “Due to falling demand, new building prices are also likely to fall. However, if construction costs are exploding, prices cannot fall, otherwise the property will be sold at a loss. Real estate as an investment has faced competition from the capital market and investors have dropped out.”
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No recovery in sight: “The prospects remain bleak”
Unfortunately, an upswing in the construction industry is not expected any time soon. The mood in the construction industry brightened somewhat in March, as can be seen from the monthly company survey by the ifo Institute. Expectations increased after the historic low in the previous month. “However, the prospects remain bleak,” is the conclusion of the Munich economic researchers.
Sharply increased interest rates, with which the European Central Bank (ECB) wants to combat high inflation, are particularly causing problems for housing construction. This makes many projects too expensive for builders. According to many experts, this is a social problem, as affordable housing, especially in cities, is likely to remain in short supply for years to come.
The federal government's former goal of completing 400,000 new apartments every year is becoming increasingly distant for the trade union-affiliated Institute for Macroeconomics and Economic Research (IMK). “Based on the current order intake, it is likely that only a little more than half as many apartments will be completed,” said IMK scientific director Sebastian Dullien.
With material from Reuters