After the construction industry has been running at top speed in recent years and did not let the Corona crisis slow it down, the engine is now stuttering violently. Rising interest rates and high construction costs are causing problems for the industry. In residential construction in particular, clients and investors are dropping out.
The already sluggish construction and expansion continues to falter, and the situation remains tense in many places for those looking for housing. "When the construction trade suffers, people suffer too," said Reinhard Quast, President of the Central Association of the German Construction Industry (ZDB).
The association expects industry sales of around 158 billion euros this year. If the price increases are included, that would be a drop in sales of 5.5 percent compared to the previous year. For the coming year, the ZDB forecasts a price-adjusted decline of 7.2 percent. "It's huge," Quast said. Nevertheless, with a view to the industry trend, he only spoke of a dent.
The order situation is clouding over
According to the ZDB, the weak forecast is also reflected in the mood among companies. According to an association survey, the majority of companies continue to rate the current business situation as good or at least as satisfactory. However, almost two thirds of the companies surveyed assume that the situation will deteriorate in the next six months. "That's 15 percentage points more than in the spring survey," said the ZDB.
In particular, the order situation, which has been good up to now, is clouding over. While the federal government wants to invest many billions in infrastructure, according to Quast, the municipalities often lack the money for public construction contracts. In residential construction, investors jumped out because the projects no longer paid off in view of the high construction costs and rising interest rates.
This also applies to private builders. “We also see a particularly large number of cancellations,” said ZDB general manager Felix Pakleppa. "Usually we have a cancellation rate of around one or two percent." It is currently in the double-digit percentage range. Many were no longer able to finance projects that had already been contractually agreed due to rising interest rates on loans and had to quit.
High interest rates should actually lead to falling real estate prices. However, Quast emphasized that this effect will be largely offset by rising construction costs. According to the ZDB, between January and August of this year the prices for residential construction services increased by around 16 percent compared to the same period last year.
The Association of German Pfandbrief Banks (vdp) also dampened the mood with a view to residential real estate prices. These are likely to continue to fall in the foreseeable future, said vdp general manager Jens Tolckmitt on Monday evening in Frankfurt. A slump in prices is not to be expected, however, because the need for living space remains high and the German real estate market has remained robust even in previous economic crises.
criticism of the government
Tolckmitt referred to the high valuations after a real estate boom in Germany for more than twelve years. Even a sharp drop in prices of around 20 percent, which some in the industry thought was possible, would only mean 2020 levels.
The goal of the federal government to build at least 400,000 new apartments a year in order to remedy the state of emergency is becoming more and more distant from the point of view of the ZDB. For 2022, the association assumes that around 280,000 new apartments will be completed. "A year and a half ago we assumed there were still 320,000 left." said Quast. For the coming year, the ZDB expects 245,000 completions, which would mean a decline of 12.5 percent.
The federal government wants to focus subsidies more on the renovation and energy efficiency of buildings. At the same time, however, the funds for the new building would be severely cut, criticized the ZDB experts. The specifications for energy standards, especially for social housing, are also too high.
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