Construction activity declined sharply

In November 2022, around 24,000 dwellings were approved in Germany. That was about 5,000 or 16.3 percent fewer building permits than in November of the previous year. This is an alarming figure, because new flats are urgently needed.

Construction activity will grow at a slower pace throughout Europe in the years 2023 to 2025. In Germany, new residential construction in particular is coming under increasing pressure. "The main reasons include the considerably more expensive housing loans, sharply increased construction costs and the reduction of the federal government's subsidies for new construction," says Ifo expert Ludwig Dorffmeister.

According to the results of the ifo survey in December 2022, order books remained at a high level, but they declined for the fifth month in a row. Necessary new orders remain absent. Nevertheless, the negative consequences of this development are likely to have only a limited impact on construction activity for the time being due to the long realisation times. The finishing trade in particular will still have its work cut out in the coming months due to the capacity bottlenecks. In the period from 2023 to 2024, construction activity will decline by a total of almost three percent and will not increase again slightly until 2025, the experts predict.

The general conditions for private builders and housing companies have deteriorated drastically. The price trend and rising interest rates will continue to cause problems for the construction industry in the coming years. New housing construction is collapsing more than the overall construction volume. Policymakers will have to change their strategy in order to achieve their goals for the creation of new housing, notes the German Institute for Economic Research in Berlin.

An evaluation by the analysis company bulwiengesa of 23,000 projects under construction, in planning or completed between 2019 and 2026 revealed that project developments in Germany are not only taking place in the major cities and their surrounding areas, but also across the board and with high volumes in the periphery. At the end of 2022, the total project volume was around 186 million square metres. There were around 8,000 project developers and 23,438 projects. Of these, around 11,300 were completed, 5,400 under construction and 6,700 planned. Bulwiengesa does not expect a massive decline in construction activity until 2026.

(Photo / Graphic: © Federal Statistical Office 2023)