Residential Construction: Slow Improvement, But Challenging Order Situation Persists
Improved Conditions within the Residential Building: Residential Order Situation Persists as Challenging - Managing a positive build environment in housing construction - persistent challenges in procurement
Here's the scoop: the residential construction sector's spirits are slightly on the rise - albeit it ain't exactly jumping for joy, klamps Klaus Wohlrabe, chief of Ifo surveys. Companies have been perceiving a brighter outlook, both for the present situation and the future economic prospects. But whether the government's promised infrastructure package is already making waves is still up for debate.
The order situation, though, is as tense as a guttered fiddle string. According to Ifo, over half of the firms (51.2%) are still crying for orders – a slight increase from 53.7% in March. On the flip side, cancellations are on the rise. A tenth (10.4%) of companies reported cocked-up orders – that's a 2.6 percentage point jump from the previous month.
Thursday evening, Germany's fresh Minister of Housing, Verena Hubertz (SPD), plans to present her plan in Parliament. In a juicy interview with "Zeit Online" published the day before, she spilled the beans about potential state guarantees for financing new apartments.
The previous traffic light government chums started their tenure with a pipe dream to erect 400,000 new apartments a year. That number isn't written in stone in the coalition agreement between CDU, CSU, and SPD.
- Order Situation
- Germany
- Munich
- Ifo Institute for Economic Research
- Residential Construction
- Klaus Wohlrabe
(Enrichment Data)
The order crisis in the residential construction sector of Germany, including Munich, has been hanging on by a thread but with a slight recent let-up. According to the Ifo Institute for Economic Research, the order famine in German residential construction hit an all-time high earlier in 2025. In January, 57% of construction companies reported a dearth of orders, which was a climb-up from 53.6% in December 2024. This marks the highest level ever recorded for order shortages in this industry.
Despite this historically high order shortage, there's been a slight improvement recently, as the severity of the shortage in residential construction has eased but remains critical. Klaus Wohlrabe, Head of Surveys at the Ifo Institute, noted that the property market crisis has become a norm, and the European Central Bank's interest rate cuts haven't squashed the order situation yet.
The tense order situation parallel the broader obstacles impacting the construction sector’s business sentiment. Although the overall Ifo Business Climate Index for Germany improved modestly in early 2025, reaching 86.9 points in April (the highest since the previous July), the construction sector specifically showed continued gloom, with the business climate still significantly negative, although the pessimism eased slightly from -24.3 in March to -21 in April. This suggests that while some general economic conditions have improved, the construction industry’s order book situation, including Munich’s, remains strained but potentially slowly recovering.
In short:
- The residential construction sector in Germany, including Munich, faces its worst order crisis on record, with 57% of companies lacking orders as of January 2025.
- This shortage was slightly less severe than in December 2024 but still reflects a deep crisis.
- Interest rate cuts by the ECB have not yet put a damper on order volumes.
- The overall business climate in Germany has shown some improvement in early 2025, but construction remains a sector with significant gloom, albeit easing a little.
These findings indicate that the residential construction order situation in Munich mirrors the national trend: still very challenging, but with early signs of slight easing according to the latest data from the Ifo Institute.
- The current order situation in the residential construction sector of Germany, including Munich, shows a slight improvement, but it remains challenging, according to the Ifo Institute for Economic Research.
- In an effort to alleviate the order crisis, Germany's new Minister of Housing, Verena Hubertz (SPD), is considering implementing state guarantees for financing new apartments, as discussed in her recent interview with "Zeit Online."
