The hoped-for upturn in construction will still be a long time coming. Research institutes agree on this. Studies show that the construction industry will only grow slowly in the coming years.
The construction situation will probably remain difficult for years to come. According to current studies and surveys, the German Institute for Economic Research (DIW) and the Munich Ifo Institute expect a decline in construction output in 2024 – and only a mini-growth in the following years.
Housing construction hit particularly hard
According to a DIW study, spending on construction services in Germany will decline this year for the first time since the financial crisis in 2009. According to the study, they will therefore fall by 3.5 percent to around 546 billion euros. Housing construction is expected to decline even more significantly. This is expected to shrink by 5.4 percent.
According to the study, civil engineering, which includes state-dominated road construction, is cushioning the situation somewhat, as it is expected to grow by 1.8 percent. Last year, the construction volume grew by a total of 6.1 percent. However, the main reason was the high construction prices as a result of increased inflation. Adjusted for inflation, however, there was the third real decline in a row at 1.1 percent, which is expected to be even larger in 2024 at minus 1.5 percent.
“The slump in the construction industry is taking longer than expected,” says study author Laura Pagenhardt. “It is only next year that a small increase will probably be achieved again as construction prices continue to fall.”
400,000 new apartments not accessible
The DIW expects an increase of 0.5 percent for 2025. But even then, new residential construction is likely to lag behind. According to the study authors, the goal of building 400,000 new apartments every year is becoming even more distant. In 2024 there will probably only be around 265,000.
The mood in companies in the construction industry is correspondingly gloomy. In residential construction, the business climate determined by the ifo has fallen to an all-time low since 1991. According to the institute, company sentiment reached minus 56.8 points in December after minus 54.4 points in the previous month. This is the lowest level since the survey began in 1991.
More canceled projects
Companies fear further business losses in the first half of 2024. “Although interest rates for building financing have recently fallen again, there is still no relief in sight,” said the head of the ifo surveys, Klaus Wohlrabe. 22.1 percent of the construction companies surveyed complained about canceled projects in December; in November it was 21.5 percent. In December, 56.9 percent of companies complained that order backlogs were too low.
In addition to the enormous increase in construction prices, the reason for the poor situation is also the key interest rate increases by the European Central Bank (ECB), which quickly had an impact on the interest rates for housing loans. The financing conditions are currently difficult to cope with, especially for many private households. The result: new construction projects are restricted, canceled or not even started.