Germany’s housing sector slumped deeper into crisis as project cancellations hit a record, prompting construction companies to become more pessimistic about the future than ever before.
(Bloomberg) — Germany’s housing sector slumped deeper into crisis as project cancellations hit a record, prompting construction companies to become more pessimistic about the future than ever before.
In September, 21.4% of residential builders said they were affected by construction projects being called off, according to a survey by the Munich-based Ifo Institute. That was the highest level since records began in 1991 and worse than August’s 20.7%.
Like in many other countries across Europe, housing construction in Germany is being hit as higher interest rates and inflation cause financial and material costs to soar. The lack of building threatens to intensify shortages in years to come. There is “no improvement” in sight in the short term, Ifo said in a report on Monday.
“The apartments that aren’t being started today will be missing from the rental market in two years’ time,” Klaus Wohlrabe, head of surveys at Ifo, said in the report. “Many projects are no longer economically viable.”
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As conditions deteriorate, the business climate for residential construction also plunged in September to its lowest level since the survey began in 1991, Ifo said. Almost half of companies complained about a lack of orders.
“That’s a threefold increase over the past 12 months, which is a dramatic development,” Wohlrabe said. “The conditions for new construction are difficult, to say the least.”
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