Many Cancellations in German Residential Construction
Germany’s residential construction industry is still seeing a large number of order cancellations. In August, 11.6 percent of the businesses surveyed were affected, up from 11.5 percent in the previous month. This is a finding from the ifo Institute’s survey. “Since April, we’ve seen a striking number of projects being cancelled. The general conditions for residential construction have deteriorated massively in recent months: exploding construction costs, rising interest rates for financing, and limited subsidy options are weighing heavily on potential developers’ calculations. This makes some projects unprofitable,” explains ifo researcher Felix Leiss.
“Until a few months ago, residential construction was on course for growth. Businesses still have bulging order books, but fear is taking hold as regards future developments,” Leiss continues. Very many construction companies fear a decline in business. The expectations indicator fell to minus 48.3 points, marking its lowest level since the survey began in 1991. The previous low, of minus 47.4 points, had been reached only in April.
Supply bottlenecks for construction materials have improved somewhat. “Nevertheless, materials continue to be in short supply in many places, making them expensive,” Leiss says. In August, 36.4 percent of businesses complained of supply problems; in July, the figure was 45.6 percent. High energy prices are making building materials – which are often energy-intensive to produce – even more expensive. Against this background, very many construction companies are planning further price increases.
