Wave of Cancellations in German Residential Construction Reaches New High
The crisis in the German residential construction sector continues to intensify. In August, 20.7% of companies reported canceled projects, up from 18.9% in the previous month. This is a finding of surveys by the ifo Institute. “Residential construction cancellations are piling up to a new high. We haven’t seen anything comparable to this since the survey began in 1991. The uncertainty in the market is huge,” says Klaus Wohlrabe, Head of Surveys at ifo.
“As a result of the rapid rise in construction costs and much higher interest rates, many projects that were still profitable in early 2022 are now no longer viable. Not to mention the scaling back of subsidies because of tighter energy regulations, which is also putting a strain on builders’ calculations,” Wohlrabe says. Meanwhile, construction companies are increasingly running into difficulties. While some businesses do still have full order books, fully 44.2% of participants reported a lack of orders, up from 40.3% in July. At the same time last year, the share was only 13.8%. “Some businesses are already struggling to keep their heads above water. Currently, 11.9% of residential construction companies report financing difficulties. That’s the highest proportion for over 30 years,” Wohlrabe adds. A majority of companies fear further declines in business in the coming six months. At -60.1 points, business expectations are at an exceptionally low level.
