Collapse also for renovations?
Orders in construction are falling “partly significantly”.
5/5/2023 7:27 am
There is a threat of a slump in orders in the construction sector. There is still a backlog of orders, but after that the situation is bleak. The associations are therefore calling on politicians to intervene. Otherwise, not only new construction targets are at risk, but also important energetic renovations.
In the skilled trades, the economic situation has improved overall – but there are increasing problems in the construction sector. “Companies in the construction sector still have a lot to do, but due to rising interest rates and higher financing costs, the number of orders is collapsing,” says Holger Schwannecke, Secretary General of the Central Association of German Crafts (ZDH). He calls on politicians to take countermeasures: “If the capacities that have been painstakingly increased in the construction sector in recent years are not to collapse, politicians must speed up the planning and approval processes, ensure a reliable funding framework and provide a generally suitable framework, for example with taxes.”
According to Schwannecke, housing construction and energy-efficient building refurbishment would only be possible if there were enough employees in the construction sector. Politicians must play a decisive role in preventing these employees from switching to other sectors.
Bad financing conditions
According to the current ZDH economic report, the business environment, especially in residential construction, is increasingly being shaped by the declining construction investments as a result of poorer financing conditions. The high order backlog built up in previous years had a stabilizing effect. But the order backlog is declining. The traditional revival in construction in the spring is expected to be weak.
The Central Association of the German Construction Industry commented in the economic report that demand is declining, particularly in residential construction. The reasons given were the significantly higher level of real estate financing costs with reduced subsidies, but at the same time increased energy efficiency requirements. “Since June last year, building permits and orders in residential construction have been in reverse gear and at an increasing pace.” The construction companies recorded a 37 percent drop in residential construction orders in February.
“The orders on hand are now being processed quickly, and there are no follow-up orders for the companies,” it said. “This means that there is an acute danger that construction companies will be underutilized. Some construction companies are now resorting to short-time work.” In view of the scarce living space, this is a completely wrong development. Clear investment impulses are needed in the funding policy. The large housing associations had already made it clear that they see new construction in Germany on the brink of collapse. The state must significantly increase its subsidies for housing construction.
Significant risk factors
Overall, business expectations in the skilled trades have recovered, as the ZDH economic report showed. The business situation was supported by government relief measures for energy, a relaxation of the supply chains and an emerging decline in inflation. However, according to Schwannecke, there are still considerable economic risk factors – security of energy supply, inflation and the development of capital market interest rates.
“According to all these signs, no strong economic revival in the skilled trades is to be expected this year, at best an upward trend starting in the second half of 2023.” It is all the more important that the federal government does not impose any additional burdens on companies with its decisions.