German housing construction sector cancellations hit new high: survey

THE crisis facing Germany’s residential construction sector, triggered by high credit and material costs, intensified in August, with the number of companies reporting cancelled projects at a new high, according to a survey published on Tuesday (Sep 12).

One in five companies – 20.7 per cent – reported cancelled projects in August, up from 18.9 per cent the previous month, according to the Munich-based Ifo economic institute.

“Residential construction cancellations are piling up to a new high. We haven’t seen anything comparable to this since the survey began in 1991,” said Ifo’s head of surveys Klaus Wohlrabe.

Many projects that were still profitable in early 2022 are no longer viable due to the rapid rise in construction costs and much higher interest rates, as well as the scaling-back of subsidies because of tighter energy regulations, he added.

An increasing number of firms are facing difficulties, with 44.2 per cent of companies reporting a lack of orders in August, versus 13.8 per cent at the same time last year, said the institute.

“Some businesses are already struggling to keep their heads above water,” said Wohlrabe, adding that nearly 12 per cent of companies in the sector are reporting that they face financing difficulties, the highest proportion in more than 30 years.

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A majority of companies fear further declines in business in the coming six months, according to Ifo.

“The uncertainty in the market is huge,” said Wohlrabe. REUTERS