Many Construction Projects in Germany Are Being Canceled
Germany’s construction sector is currently experiencing an uncommonly high number of project cancellations. In building construction, the proportion of affected companies was 11.5 percent in June; in May, that figure was even higher at 13.4 percent. In civil engineering, the figure was 9.0 percent, up from 8.8 percent in May. This is the finding of an ifo Institute survey. “The scale is similar to what happened during the coronavirus shock in spring 2020. This time, we’re seeing particularly frequent cancellations in residential construction. On the other hand, order books remain full to bursting on average,” says ifo researcher Felix Leiss.
Materials are still in short supply in many places. In June, 47.1 percent of building construction companies reported supply bottlenecks, down from 56.6 percent in the previous month. In civil engineering, the proportion fell to 39.7 percent; in May, it was 44.8 percent. “These bottlenecks are easing, but very slowly. In the meantime, shortages are leading to rapidly rising prices. High energy prices are also driving up prices for many building materials,” Leiss adds. On average, survey respondents expect the bottlenecks to last for almost another nine months. “Companies are having to pass on the higher prices for materials and fuel to customers, which is leading to a further surge in construction prices. But developers are also having to contend with higher interest rates. In residential construction, this is compounded by the uncertainty over future subsidy possibilities. The result is that many projects are being reconsidered.”
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