A growing number of German businesses are expressing growing concerns about a discernible decline in orders within the residential construction sector. The data from November 2023 reveals that 49.1% of companies reported dissatisfaction in this regard, marking the eighth consecutive increase from the previous month’s 48.7%. This persistent trend highlights the challenges faced by businesses in the construction domain. Simultaneously, order cancellations, accounting for 21.5%, remained relatively consistent compared to the preceding month’s figure of 22.2%.
According to Klaus Wohlrabe, the head of ifo surveys, housing companies are currently grappling with a substantial loss of customers. The primary contributors to this predicament are identified as the escalating construction costs and the prevailing interest rate levels. These factors are causing many builders to reassess their projects, leading to a growing realization that under the current economic conditions, several endeavors are no longer financially feasible. Consequently, numerous projects are either being postponed or, in some cases, entirely canceled.
The persistent increase in dissatisfaction among companies within the residential construction sector underscores the urgency for addressing the challenges posed by escalating costs and interest rates. The ramifications of these issues extend beyond the individual companies, impacting the broader landscape of residential construction in Germany. As businesses grapple with the complexities of the current economic climate, strategic measures may be required to navigate these challenges and foster a more sustainable environment for the construction industry.
In the latest survey conducted in November 2023, an increasing number of German companies, amounting to 49.1%, voiced concerns about the scarcity of orders in the residential construction sector. This represents the eighth consecutive rise in such reports, highlighting the persistent challenges faced by businesses in this domain. The continuous uptrend in this metric indicates a growing trend of companies grappling with a decline in orders, which, coupled with the intricate dynamics of the construction industry, is a cause for significant apprehension.
Order cancellations, contributing to 21.5% of the reports, played a relatively stable role compared to the previous month (22.2%). This stability suggests that, while order cancellations remain a factor, the primary concern lies in the dwindling number of incoming orders. Klaus Wohlrabe, Head of the ifo Surveys, underscores the severity of the situation, noting that housing companies are losing customers at an alarming rate. The confluence of elevated construction costs and prevailing interest rate levels is driving many builders to reconsider their projects. Under these challenging conditions, numerous projects no longer appear financially viable, leading to their postponement or outright cancellation.
The financing landscape also presents its own set of challenges, with 11.1% of participants reporting difficulties in securing funds, marking an increase from the 9.9% reported in October. This suggests a broader financial strain affecting companies in the construction sector, amplifying the complexity of their operational landscape.
Furthermore, the overall business climate, as measured by the ifo Business Climate Index, paints a grim picture. With an extraordinarily weak score of -54.6 points, this marks the lowest level since the inception of the survey in 1991. This continued decline indicates a sustained lack of optimism among surveyed companies, emphasizing the enduring hardships they face. Klaus Wohlrabe’s commentary on the survey results reveals that the mood remains icy, with no imminent signs of improvement. This protracted period of subdued business sentiment underscores the pressing need for strategic interventions to navigate the challenging economic landscape and foster recovery in the residential construction sector.
