High inflation and a lack of building materials are causing significantly more cancellations of housing projects. According to the IFO Institute, every sixth project is now being put on hold. The order books of German companies are still full, but concerns about the future are noticeably increasing.
There are increasing signs of a crisis in German residential construction. According to the monthly survey by the IFO Institute, an increasing number of construction companies are receiving order cancellations. At the same time, demand for real estate loans is falling. In September, 16.7 percent of the construction companies surveyed reported canceled orders, significantly more than in August (11.6 percent), as reported by the IFO Institute.
The reason for this is the rapidly rising material and energy prices and the higher interest rates on loans. “For some builders, all of this is no longer possible. They are putting projects on hold or pulling the ripcord entirely,” said IFO expert Felix Leiss. “On average, companies still have large order reserves, but worries about the future have rarely been so great.”
According to the IFO survey, expectations are at their lowest level since the survey began in 1991. In addition, 32.7 percent of the companies reported shortages in building materials. In the previous month, the proportion was still 36.4 percent. The IFO Institute surveys thousands of companies, including construction companies, every month for its economic forecasts.
The construction companies also have to pass on the higher procurement costs to the customers. For the coming months, “further price increases are planned across the board,” warned the research institute.
At the same time, interest in real estate loans is declining. “Demand has collapsed from one day to the next. Many projects in the planning stage are being cancelled,” Sparkasse President Helmut Schleweis told the “Handelsblatt”. Schleweis also named the rising costs as a key factor. In the first half of the year, demand for real estate loans was still high. “But that was also due to the fact that many projects were already on the way in terms of planning and finances,” said Schleweis. “In the past few weeks, the picture has changed abruptly.”