“A storm is coming,” predicts economist Wohlrabe. Contracts for the construction of apartments in Germany are canceled and no new ones are added. 40.3% of businesses complain about their lack, compared to 10.8% a year ago. Over 10% of companies are already experiencing financial difficulties, current trends emerged from the latest survey of the Ifo Institute. Economist Holger Zschaepitz also drew attention to the drop in apartment prices.
Hans Štembera
Description: Construction, illustration photo
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The number of canceled orders is increasing in German housing construction. “Residential construction companies are under enormous pressure. Not only are existing orders constantly being cancelled, but there are also fewer and fewer new orders coming in,” said Klaus Wohlrabe, Head of Surveys Ifo Institute for economic research.
According to the latest Ifo Institute survey, the number of canceled orders was confirmed by 18.9% of companies, which represents a decrease compared to last month, when their number was 19.2%. Contrasted with the long-term average of 3.1% and the 1.5% average in the years to 2021, this represents a significant increase from spring 2022.
Experts agree that construction companies in Germany are in a difficult situation, finding themselves under pressure from both cancellations and a general lack of new projects. In July 2023, 40.3% of companies reported a lack of orders, which represents an increase of 5.8% compared to June. A significant change is visible compared to the previous year, when this indicator was 10.8%. “A storm is coming. After many years of expansion, higher interest rates and a drastic increase in construction costs are now stifling new orders,” economist Wohlrabe shared his findings.
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The current situation has already caused problems for several companies, the survey shows that 10.5% of companies oriented to the construction of residential buildings report financial difficulties. Compared to the previous year, the number of such companies is almost twice as high.
“Due to the new conditions, many projects are no longer profitable for investors, and it is increasingly difficult to secure financing even for private construction,” said Wolrabe.
Most of the companies participating in the Ifo Institute survey expect the situation to deteriorate further in the future. These expectations are extremely negative at -52.1%.
German economist Holger Zschaepitz pointed out on social networks that the prices of apartments themselves continued to fall in July, by up to 1.5%. “Good morning from Germany, where the housing bubble is still losing its breath. With the exception of existing homes, prices continued to decline in all segments in July. The most significant decline was recorded by existing apartments, which fell by 1.5%. The Europace Composite Index decreased by 0.5% in July. However, with too little new construction and demand remaining strong, the correction in the German property market is likely to be limited overall,” he wrote on Twitter.
Good Morning from Germany, where housing bubble continues to lose more air. W/exception of existing homes, prices continued to fall in all segments in July. Sharpest slump was in existing apartments, which fell by 1.5%. Europace Composite Index fell by 0.5% in July. However, as… pic.twitter.com/YmUiAmmwtY
— Holger Zschaepitz (@Schuldensuehner) August 20, 2023
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author: Lucie Kroutilová
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2023-08-22 05:15:00
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