Berlin (Reuters) – The mood among housing construction companies in Germany has fallen to a historic low.
The barometer for the business climate fell from minus 56.9 to minus 59.0 points in January, as the Munich Ifo Institute announced on Tuesday in its monthly survey. This is the lowest value ever measured. There is no rapid improvement in sight, as the prospects for the coming months are assessed to be worse than ever: the barometer for expectations fell from minus 64.7 to minus 68.9 points.
“The outlook for the coming months is bleak,” said the head of the Ifo surveys, Klaus Wohlrabe. “Housing construction continues to be exposed to a double burden.” While on the one hand there were no new orders, on the other hand projects continued to be canceled.
“THE CANNOT BE TALKED ABOUT A TREND REVERSAL”
“A lack of orders is putting a strain on the business of residential builders,” said Wohlrabe. In January, 52.5 percent of companies complained about a lack of orders, compared to 56.9 percent in December. There was also a slight decline in cancellations: 17.4 percent were affected, after 22.1 percent at the end of 2023. However, according to the Ifo Institute, this is no reason for optimism. “We cannot yet speak of a turnaround in housing construction. The difficult conditions have hardly changed,” said Wohlrabe. “High interest rates and construction costs don’t make things any easier for builders.”
According to the Ifo Institute, only around 225,000 apartments are expected to be built this year. Construction Minister Klara Geywitz (SPD) is actually aiming for 400,000 per year. According to the real estate industry, this target is likely to be missed by 2025. The construction industry therefore sees politics as having a duty. “The housing shortage continues to pile up,” said the President of the Federal Association of Independent Real Estate and Housing Companies (BFW), Dirk Salewski. “This downward spiral must be stopped.” Noticeable relief in the requirements for new buildings as well as tax relief are required, “immediately”. The costs and requirements for housing construction must come down. “Hundreds of thousands of apartments are missing, jobs are threatened, an entire sector of the economy is in danger of collapsing,” Salewski sounded the alarm.
At least there is a prospect that the European Central Bank (ECB) will cut its key interest rate several times this year in view of declining inflation. This means that building interest rates are also likely to fall, making financing cheaper. Investors on the financial market have recently somewhat reduced their speculation about a rapid first interest rate cut by the ECB. A step down at the April interest rate meeting on the money market is now only estimated to have a probability of around 48 percent. In January, the first interest rate cut in April was temporarily included in the prices. Since then, several ECB monetary authorities have tried to dampen expectations on the financial market.
(Report by Rene Wagner, edited by Christian Rüttger – If you have any questions, please contact our editorial team at [email protected])