Still many cancellations in residential construction in Germany

Many projects are still being cancelled in German residential construction, according to a statement by the ifo Institute. The share of affected companies was 11.5 percent in July 2022, after 12.3 percent in the previous month. In May, the share had even been 15.8 per cent. This is according to the institute’s surveys. “Order books are still full to bursting. But the exploding construction costs, higher interest rates and poorer funding opportunities are putting more and more projects in doubt. We have been observing a wave of cancellations since April. The ambitious new construction targets of the German government are thus becoming a distant prospect,” says ifo researcher Felix Leiss.

The material bottlenecks - which had worsened drastically with the Russian invasion of Ukraine - are only slowly easing. In July, 45.6 per cent of the companies in the ­residential construction sector still reported delivery problems. In the previous month, the share had been 47.6 percent. “As a result of the shortage and the high energy costs, many building materials have become considerably more expensive. Therefore, the construction companies themselves had to keep turning the price screw,” adds Leiss. The development is currently losing some of its momentum, but many respondents still expect further price adjustments in the coming months. Price expectations stood at 54.0 points, after 61.5 points in the previous month. “At the same time, however, higher interest rates and, in the residential construction sector, limited subsidies are weighing on demand for construction services. The mood in construction is tilting,” Leiss continues. Many companies fear a decline in business for the next six months.