The construction crisis is also affecting the job market: the construction industry fears that 10,000 people could lose their jobs this year. From being a pillar of the German economy, the industry has developed into a problem child.
Germany is in a construction and housing crisis. Fewer and fewer apartments are being built, which is putting a strain on the housing market – and the construction industry. For the first time since the financial crisis 15 years ago, the German construction industry is expecting job cuts in the sector in 2024.
“We are currently expecting that around 10,000 jobs will have to be cut in the coming months,” said Tim-Oliver Müller, general manager of the construction industry association HDB, to the dpa news agency.
Sales in residential construction fell by 12 percent
The reason for the feared job losses is the weak economy in construction. While commercial construction and public construction got away with a black eye in 2023 and only recorded slightly falling sales, sales in residential construction fell by 12 percent, said Müller. “We assume that sales in residential construction will fall by a further 12 percent in 2024,” said Müller.
That affects the industry. According to an HDB member survey, 55 percent of the 450 companies surveyed expect their earnings situation to deteriorate in 2024. 60 percent wanted to keep the workforce stable, 12 percent want to expand jobs and almost a third (29 percent) want to cut jobs.
From support to problem child
According to the HDB, the construction industry was an employer for around 927,000 people in 2023. The reduction of around 10,000 jobs only involves around one percent of the jobs in the industry. At the same time, it would be the first loss of employment in construction since 2008 during the global financial crisis, when a good 700,000 people were working in the industry.
Afterwards, employment rose steadily in the real estate boom by a total of more than 200,000 people by 2022. According to the HDB, it stagnated last year. For years, the construction industry was a pillar of the German economy, but now it has become a problem child.
The prospects are worrying, as construction is expected to lack around 120,000 specialists in 2030 due to demographic change alone, said HDB Managing Director Müller. “No matter what happens, we have to hire in order to maintain the level of skilled workers – despite the crisis.” The construction is needed more urgently than ever. “Especially when the housing construction engine starts up again, we will be lacking every single skilled worker that we are now in danger of losing.”
Crisis due to high interest rates and rising material costs
The Central Association of the German Construction Industry (ZDB) was already pessimistic in December. The association, which represents medium-sized construction companies, expected a significant loss of around 30,000 employees this year. While skilled workers are still being sought in the expansion areas and civil engineering, capacities in residential construction are not being utilized to capacity.
In view of increased interest rates and expensive materials, housing construction in Germany is stalling. The Ifo Institute for Economic Research expects that only 225,000 apartments will be completed in 2024, down from an estimated 270,000 last year.
DZ Bank also sees a downward trend: by 2025, the number of annual apartment completions could fall to 200,000 apartments. That would only be half as much as the traffic light coalition had planned. According to the federal government, 400,000 new apartments should actually be built every year. There is a severe housing shortage, especially in cities, which is driving up rents sharply.
number of Building permits continues to decline
The declining building permits also make the deep crisis in housing construction abundantly clear, said Axel Gedaschko, President of the leading association of the housing industry GdW. According to the Federal Statistical Office, around 238,500 permits for apartments were issued up to and including November 2023 – a decrease of 25.9 percent compared to the same period last year.
The number of approvals has been declining at double-digit rates for months, especially for single- and two-family homes, said Felix Pakleppa, general manager of the Central Association of the German Construction Industry. 38.6 percent fewer permits were issued for the construction of single-family homes and 49.2 percent fewer for two-family homes. The decline in multi-family homes was 23.8 percent compared to the same period last year.
“A lack of housing could become a dividing wedge in society”
A slight decline in construction costs is to be expected for the new year, which was already evident at the end of 2023, the HDB explained. Nevertheless, costs remained high, also due to official requirements and regulations.
“If the federal government does not act immediately and noticeably improve the conditions, especially for affordable housing, the housing shortage will become a dividing wedge for our society for years to come,” said GdW President Gedaschko. According to the traffic light coalition, 100,000 social housing should actually be among the targeted 400,000 new apartments per year be.
KfW program for cheaper housing
A new KfW funding program worth a total of two billion euros is intended to relieve the strained housing market. “I am pleased that we have received additional money,” said Federal Construction Minister Klara Geywitz (SPD) to the “Handelsblatt”. On Thursday, the Budget Committee in the Bundestag gave the program the green light.
“We will now launch the new KfW funding as quickly as possible so that the billion-dollar program can come onto the market quickly,” said Geywitz. According to the minister, one billion euros are available for 2024 and 2025. “We only want to promote apartments in the lower and middle price segment,” emphasized the minister.
The construction industry praises the funding plans
The construction industry welcomed the new funding program. Geywitz “convinced the budget committee in the final stages of its deliberations of an interest reduction program for housing construction – that is a good signal given the precarious budget situation and the situation on the rental market,” explained HDB managing director Müller.
Gedaschko from GdW also praised the decision as “exactly the right signal”. Pakleppa from the Central Association of the German Construction Industry spoke of a “small glimmer of hope”. But there is still no reason to give the all-clear; it now depends on the design of the program.