New Record Low in Orders for German Residential Construction

The slump in residential construction in Germany continues. In July, 40.3% of companies complained of a lack of orders, up from 34.5% in June. A year ago, the proportion was 10.8%. These findings are from the ifo Institute’s latest survey. “A storm is brewing. Following many years of expansion, now higher interest rates and the drastic rise in construction costs are choking off new business,” says Klaus Wohlrabe, Head of Surveys at ifo.

Since spring 2022, there have been a striking number of order cancellations in residential construction. Most recently, 18.9% of companies complained of canceled projects, down from 19.2% in the previous month. The long-term average was just 3.1%, and for the years up to and including 2021, that figure was only 1.5%. “Residential construction companies are under tremendous pressure. Not only are existing orders being canceled all the time, but fewer and fewer new orders are coming in as well,” Wohlrabe says.

Many companies are still getting by on the backlog of orders they managed to accrue when times were better. But the situation is already putting several businesses under threat. In the most recent survey, 10.5% of residential construction companies reported having financial difficulties. This was twice as many as in the previous year. “Given the new conditions, many projects are no longer profitable for investors, and it’s becoming increasingly difficult to secure funding for private construction as well,” Wohlrabe says. Looking to the months ahead, a majority of the companies surveyed expect the situation to deteriorate further. Business expectations were extraordinarily weak at -52.1%.