IFO figures give hope
Does the construction industry see light at the end of the tunnel?
17.06.2024, 11:15 a.m.
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The construction industry is in a deep crisis due to a lack of orders. Figures from the IFO Institute now show an increase in the business climate in residential construction. Has the worst been reached? The IFO expert predicts a long road to recovery.
According to a survey by the Munich-based IFO Institute, the mood in the construction industry has brightened. In residential construction, the business climate has “increased significantly,” the IFO said. However, the majority of companies remain pessimistic. The business climate in civil engineering has also improved “noticeably.” “But there is still a long way to go to recovery,” explained IFO expert Klaus Wohlrabe.
According to Wohlrabe, the housing construction companies hope that they have left the trough behind them. The lack of orders continues to be a key problem. In May, 51.7 percent of companies reported this, compared to 55 percent in April.
Despite the decline, there is no all-clear when it comes to order cancellations, the IFO Institute explained: In May, 15.1 percent of companies reported canceled projects, compared to 17.6 percent in April. Many companies are trying to counteract the lack of orders by reducing prices, explained Wohlrabe. The index for the business climate in residential construction improved from minus 52.3 points in April to minus 46.4 points.
According to the IFO, the business climate in civil engineering is noticeably better than in residential construction, at minus 6.7 points in May. In April, the index was at minus 10.2 points. “Civil engineers are much more satisfied with current business,” explained Wohlrabe. They would, however, be happy to receive more orders.
Prefabricated houses gain share
Meanwhile, according to figures from the Federal Statistical Office, the crisis in the construction sector is also having an impact on the construction of prefabricated houses. As the Federal Office in Wiesbaden announced, the decline last year compared to the previous year was 2.5 percent, which was significantly lower than in conventional housing construction. A total of 19,900 residential buildings were built using prefabricated construction.
The construction of new residential buildings using conventional construction methods fell by 7.5 percent to 76,900 in 2023. The share of prefabricated buildings rose from 19.7 percent in 2022 to 20.6 percent. Houses made of prefabricated parts are cheaper and take less time to build. As construction costs and interest rates rise, the attractiveness of this type of construction also increased.
There was even a whopping increase of 12.0 percent in the prefabricated construction of multi-family houses. However, single-family houses make up the majority of completed prefabricated houses at 84.6 percent. Their number fell by 4.1 percent to 16,900 in 2023. The number of conventionally completed single-family houses fell by 10.8 percent to 59,500 in the same period. According to the statisticians, prefabricated houses are particularly popular with private builders. They built 90.3 percent of the prefabricated houses last year. In 8.9 percent of cases, a company was the developer, in 0.8 percent the public sector.