Construction industry with fewer orders - cancellations in residential construction

construction site

The procurement of building materials and the rising prices presented the companies with major problems.

(Photo: imago images/photothek)

Wiesbaden, Berlin German construction companies started the second half of the year with a drop in orders. Adjusted for inflation, new business in the main construction trades was 5.8 percent weaker in July than in the same month last year, as the Federal Statistical Office announced on Friday.

Compared to the previous month, however, the balance is much better: Here there was an increase of 8.1 percent. In the first seven months of the year, new orders fell by 3.8 percent in real terms, while sales fell by as much as 4.3 percent.

A rapid trend reversal is not in sight. High construction costs and rising interest rates on loans, for example, are increasingly causing orders to be canceled in residential construction. In August, 11.6 percent of the companies surveyed were affected, after 11.5 percent in the previous month, as the Munich Ifo Institute found out in its company survey.

"Since April we have seen that a striking number of projects have been canceled," said Ifo researcher Felix Leiss. The framework conditions for housing construction have deteriorated massively in recent months.

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"Explosive construction costs, rising interest rates on financing and limited funding options are a heavy burden on potential builders' calculations," he said. "Some projects become unprofitable as a result."

The German Construction Industry Association (BVB) recently explained that the procurement of building materials and rising prices posed major problems for companies. "Just in time - as we knew it in the pre-Corona period - no longer takes place," said BVB chairman Marcus Nachbauer.

If you exclude the higher prices, real revenues in 2022 are likely to fall by one to two percent compared to the previous year. From today's perspective, he does not expect an inflation-adjusted increase in sales in 2023 either. Demand for refurbishments is providing impetus, while new construction is losing momentum.

More: How real estate prices for houses and apartments are developing

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