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"The construction financing is imploding"

Sigmaringen is best known among nobility experts.

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"The construction financing is imploding"

Sigmaringen is best known among nobility experts. A magnificent castle towers above the town of 17,000 inhabitants on the edge of the Swabian Alb. The Swabian line of the House of Hohenzollern resides here with Prince Karl Friedrich at the head. Below the residence, people live in a more modern way - and particularly often in a prefabricated house.

Because nowhere else in Germany is the proportion of completely or partially prefabricated homes higher than in Sigmaringen and the associated district. A good 60 percent of the newly built one- and two-family houses there are made of prefabricated wood, as figures from the Federal Statistical Office show.

Other densely wooded regions from southern Germany, such as Calw, Rottweil, Göppingen and the Odenwaldkreis, follow in the top 10 list. Here, the rate is more than 50 percent in each case – and is therefore a good twice as high as in Germany.

According to the Federal Association of German Prefabricated Buildings (BDF), the proportion of prefabricated houses in Germany in 2021 was 23.1 percent. This is a record – and an expression of strong industry growth in recent years. In 2011, the rate was just 15 percent.

Association managing director Achim Hannott names the increasingly popular building material wood as one of the reasons for the boom. In addition, there would be energy efficiency, constant construction quality through industrial prefabrication in dry factory buildings and reliable cost calculation through guaranteed fixed prices.

In the meantime, however, the prefabricated house companies are also feeling a headwind from rising interest rates, more expensive building materials such as wood or insulating materials and canceled subsidies. At the beginning of the year, the Federal Ministry of Economics cut a program for energy-efficient houses.

The order books of around 50 domestic manufacturers are still well filled for the next twelve to 15 months, as Hannott explains. The turnover of the medium-sized industry is expected to increase by nine percent to 3.75 billion euros in 2022.

For the first time in years, however, the companies are receiving fewer new orders for the houses, which cost an average of 300,000 euros. "For a few months we have felt a great reluctance," says the association's managing director. He doesn't expect any improvement in the foreseeable future either: "Building has to do with safety and trust," says Hannott. “Politics are currently not conveying either of these things.”

The building permit figures from the Federal Statistical Office reflect the uncertainty and inflation concerns of many people. In September, for one and two-family houses, they were lower than in any other month of the year, regardless of the type of construction, at 7,223. And that seems to be just the beginning, because the statistics on the permits are lagging behind.

The full extent will only become apparent in the coming months. "The topic of construction financing is imploding," says Liane Buchholz, President of the Savings Banks Association of Westphalia-Lippe, which is one of the largest in Germany with a good six million customers and more than 160 billion euros in total assets.

In August, for example, new business in its own catchment area fell by ten percent, in September by 20 percent and in October by 30 percent, each compared to the same month last year. And the savings banks are by far the market leaders in this business.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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