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The end of the boom - "Some are currently deciding against building houses"

From one hundred to zero in a few months.

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The end of the boom - "Some are currently deciding against building houses"

From one hundred to zero in a few months. The German construction industry is doing worse. "We don't get any material, and if we do get it, it's ridiculously expensive. And when we have it, we don't have the people to process it or install it," says Dirk Salewski, President of the Federal Association of Independent Real Estate and Housing Companies (BfW).

He is not at all surprised by the current statistics: In real terms, i.e. price-adjusted, sales in the main construction trades fell by 11.3 percent in the first half of the year compared to the previous year. Nominally, sales increased by 6.2 percent - an expression of the sometimes double-digit price increases in the construction industry.

And the Federal Statistical Office reported a decline of around 13 percent in real terms for incoming orders in June compared to the previous year. A real minus of three percent is now reported for the entire first half of the year.

The triggers for the downward trend are the high prices for building materials, rising interest rates and the shortage of skilled workers. "We have a price crisis in all areas," says Salewski, whose main job is managing director of the Beta home and property utilization company in the Ruhr area.

The member companies of his association own around ten percent of German apartments. He gives examples: “The higher energy costs, the doubling of transport costs. Steel has at times increased by up to 100 percent since autumn 2021. It was similar with lumber.”

The BFW President mainly blames the cuts in federal subsidies for energy-efficient buildings for the dramatic drop in incoming orders. Federal Economics Minister Robert Habeck (Greens) initially stopped the KfW program in January and switched it over in the summer.

"Thousands of housing projects that were based on the subsidy were not applied for," says Salewski. The contractor believes the declines will only get bigger.

“In addition to the high construction costs and rising interest rates, private builders also have to cope with rising energy and living costs. Some people are currently deciding against building a house," agrees Tim-Oliver Müller, General Manager of the German Construction Industry Association.

But even with institutional investors, a number of residential construction projects would be put to the test and postponed for the time being. There will be no relaxation of the tense housing market.

“In the last few months, there have already been clear signs of slowing down when applying for building permits in residential construction,” adds Felix Pakleppa, General Manager of the Central Association of the German Construction Industry (ZDB). In particular, home construction is affected by price and interest rate developments.

While institutional investors were completing their projects, private home builders were increasingly reaching their budget limits. “And the funding background for the coming year is not even remotely known. Here we will see clear impacts in the next few months," Pakleppa is also convinced: "More and more projects are being called into question. Cancellations add to the missing orders.”

According to the Ifo Institute, cancellation reports in residential construction have been ten to 15 percent in recent months - a year ago it was only two percent. With the current incoming orders, building construction is hardest hit with a drop of around 18 percent in orders, followed by residential construction with a decline of 17 percent. Road construction still achieves the best value with eleven percent less. The total order volume in the first half of the year was 51 billion euros.

"New residential construction is being hit hard, above all by a mix of rising material prices, noticeably higher interest rates, high inflation and the significant reduction in subsidies," Pakleppa sums up. "This puts the goal of building 400,000 apartments a long way off." At least officially, this number is still in the traffic light government's plan, although Federal Building Minister Clara Geywitz (SPD) has already backtracked in talks.

Pakleppa fears that the construction industry is at risk of being slowed down despite high demand. "More and more clients are stepping on the investment brakes," says construction industry boss Müller.

That is the wrong signal in view of the urgent need to modernize the infrastructure and the high demand for living space. “Investments need security and stability. Neither is currently available,” says Müller. “And we need relief on the price front and no further burdens. If the construction industry gets out of step, the most important pillar of the economy is lost overall.”

Against this background, ZDB boss Pakleppa warns of a further burden. Because the sharp rise in energy prices not only caused problems for the citizens, but also for the economy. They find it increasingly difficult to offer goods and services competitively. An increase in the CO₂ levy by January 2023 does not fit in at all.

Many planned projects are not realized, Salewski warns. This will also increase the number of open building permits. The BFW President calls the problem: "You cannot live in a building permit."

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with the financial journalists from WELT. 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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