The construction industry is in a prolonged slump, while the downward trend in housing construction has continued unabated for more than a year. In order to contain the crisis, the associations are calling for support.
The crisis in residential construction is increasingly reflected in the order situation: new orders for residential construction fell by almost 40 percent in March compared to the previous year, as the Federal Statistical Office announced today.
Since April 2022, real orders in residential construction have always fallen by double digits compared to the same month last year. The non-price-adjusted incoming orders were around eight percent below the previous year’s level despite significantly higher construction prices with a volume of 9.8 billion euros. Residential construction in particular is suffering from the reluctance of private and commercial investors.
After the almost complete cancellation of the new building subsidy last year, the association is increasingly feeling the negative consequences of this decision. Now there is a need for a significant interest rate support, for example through KfW loans and a “temporary suspension of the excessive energy requirements”. Otherwise the crisis on the housing market will worsen.
Warning underutilization, Short-time work and job cuts
The Central Association of the German Construction Industry explained: “We have been drawing on the order backlog for six months, and now there are no follow-up orders.” Politicians have published the goal of 400,000 new apartments per year. Against this background, building contractors would have created new jobs. Underutilization, short-time work and “in the worst case, job cuts” are now threatened. The construction industry association also said: “An improvement is not in sight.”
Only on Tuesday did the Federal Statistical Office put the number of completed apartments in 2022 at 295,300, clearly missing the government’s target of 400,000 new apartments.
The entire industry, which also includes the construction of commercial real estate, had to cope with significant losses compared to the previous year. Compared to March of the previous year, incoming orders fell by 20.1 percent in real terms, but rose again by 0.9 percent compared to the previous month. The main association of the German construction industry explained that the strong year-on-year decline is partly due to a statistical base effect: In March 2022 there was still a real increase in orders of 16.8 percent.
High prices and financing costs brake construction
The German construction industry fears a drop in sales of five percent in real terms in the current year due to the slump in residential construction. “Even the refurbishment sector cannot compensate for the loss in sales,” said the chairman of the Federal Association of the Construction Industry, Marcus Nachbauer, in Berlin today. The Federal Association for the Construction Industry includes the main construction trades and businesses in the so-called expansion such as painters, carpenters and roofers.
Nominally, revenues are likely to increase by two percent to 435 billion euros. Adjusted for price increases of around seven percent, this ultimately means a minus. The decline in the main construction trade alone is due to the slump in demand for new residential construction. “In view of the fact that financing costs have almost quadrupled, the investment budgets of home builders and investors are not sufficient,” emphasized Nachbauer.