The construction industry has been groaning under high costs for years. Thousands of construction projects have been canceled nationwide. But now it seems as if the industry can regain hope.
The construction industry has been at a standstill for several months. Sharply increased prices, also due to higher energy costs, have left the construction industry in a state of shock and caused a great deal of uncertainty.
“Due to all the crises, customers have become more and more cautious. Nobody knows what will happen in the future. People are more likely to hold back money. As a result, we have lost a few major projects and our sales figures have dropped significantly,” says Kevin Feller, managing director of FF Baustoffe in Kassel.
But at the moment he is rubbing his eyes in surprise more and more often because the price of some building materials is suddenly going down. “I was of course happy about that. The trend is that prices are set to fall by an average of three percent by next year. I’m just happy about every percentage point that it goes down and hope that this will stimulate the economy again.”
Wood price drops sharply
According to the Federal Statistical Office, there have already been significant price declines, particularly for building materials made of wood: roof battens have become 26.1 percent cheaper than last year, solid structural timber has fallen by 20.7 percent, and prices for sawn timber have fallen by 18.3 percent.
Feller is feeling the effects of price declines, particularly in the wood sector. For example, parquet flooring has become noticeably cheaper in recent weeks. He believes that other products will follow in the coming months: “Structural steel, for example, has also become noticeably cheaper.”
For the future, he is banking on one factor in particular: “We hope that the energy crisis will pass quickly and that production costs will therefore fall. This will then cause the prices of roof tiles and bricks, for example, to fall and we can finally start building again.” Since the crisis has taken hold of his industry, Feller has also observed a new trend in the construction market: “Many older houses are now being renovated, and money is still being spent there.”
Trend renovation instead of new construction
Marian Bucevschi is benefiting from this. He has had his craft business in Ahnatal near Kassel for 15 years and has mainly worked in new construction. Since the crisis hit him with full force, however, he has mainly been renovating existing properties.
He is currently renovating the basement of a house built in 1974. “I have never experienced a crisis like the one in recent years, it was definitely a threat to my existence,” he says on the construction site. But giving up was never an option for him. “That’s why I said we need to reorient ourselves, do more in the renovation sector and take on small jobs, not just large buildings!”
Construction interest rates have risen sharply
The figures from various real estate companies show that this decision was also the right one in the long term. While construction interest rates were still around one percent in 2021, they have now reached four percent. This significant increase has also slowed down the last bit of new construction activity.
Orders received fell by 21 percent. The situation is different on the market for existing properties. According to experts, 90 percent of the properties sold currently come from this sector. “If you want to build a new building these days, you have to invest an enormous amount and you can’t calculate the costs properly because they fluctuate so much,” explains Marian Bucevschi. “If you buy an existing building for 200,000 euros and invest another 150,000, you’re still cheaper than building a new one.”
Bargain old building?
Axel Tausendpfund is also observing the trend. He is the chairman of the Association of the Southwest German Housing Industry and represents around 200 companies in the construction industry. He knows that there is another reason for the rush on old buildings. There are indeed price reductions of up to 30 percent, but you have to look closely. These are usually caused by the poor energy condition of the buildings.
“They are not insulated, have old windows, a roof that does not meet today’s standards. They may still have an old oil heating system in the basement and that’s why you really have to look closely to see whether this supposed bargain doesn’t end up being a euro grave.”
Marian Bucevschi wants to keep his craft business afloat with renovation orders until the positive trend in building materials has an impact on the order situation for new buildings, which experts say will take until 2025. Then, Marian Bucevschi hopes, things will finally be as they used to be.