A construction site in Frankfurt, Germany, July 19, 2023. REUTERS/Kai Pfaffenbach/File photo
BERLIN – Germany’s residential construction sector was again hit by a wave of cancellations in October, according to a survey published on Monday that showed a record number of firms reporting abandoned projects.
In October, 22.2 percent percent of companies reported cancelled projects, up from 21.4 percent in the previous month, the Ifo economic institute said.
“It’s getting worse all the time, with more and more projects failing due to higher interest rates and elevated construction prices,” says Klaus Wohlrabe, Ifo head of surveys.
“In residential construction, new business remains very low and companies’ order backlogs are diminishing.”
The number of companies reporting a lack of orders also increased in October, to 48.7 percent of firms from 46.6 percent in September.
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A year ago, in October 2022, that proportion was just 18.7 percent.
“Nearly half of all residential construction companies are now suffering from a lack of orders, and that number is growing every month,” said Wohlrabe.
The real-estate sector was a bedrock of Germany’s livelihood for years. Fueled by low interest rates, billions were funneled into property, which was viewed as stable and safe.
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Now a sharp rise in rates and building costs has put an end to the run, tipping developers into insolvency as bank financing dries up, deals freeze and prices fall.