Boost in Construction Sentiment, Yet Order Scenario Remains Skewed - German Housing Market Faces Challenges Ahead
Enhanced Housing Sector Mood - Order conditions in home construction stay challenging - Navigating a Positive Atmosphere in Building Construction Remains Challenging due to Ongoing Order Complication
Hey there! Let's dive into the latest of what's happening in the world of housing construction, specifically in Germany. The scene today, according to Klaus Wohlrabe, the mastermind behind Ifo surveys, is one of evolving sentiment – albeit a rather modest one.
Companies are reporting a more positive take on both the current scenario and the future economic outlook for the sector, yet whether the recent government infrastructure package is to blame for this shift remains questionable. The key players are keeping their fingers crossed for an overall industry uptick.
Now, let's turn our attention to the order situation. It's far from rosy. Over half of the companies (51.2%) are grappling with a dearth of orders, a slightly smaller percentage compared to March (53.7%). Meanwhile, the number of order cancellations has surged. As it stands, 10.4% of companies have encountered order cancellations, a steep increase of 2.6 percentage points over the previous month.
Mind you, on Thursday, Germany's new Housing Minister, Verena Hubertz (SPD), will unveil her blueprint in the Bundestag. In a recent interview with "Zeit Online," she hinted at state guarantees to facilitate financing for new apartments.
You might recall that the forerunners of the traffic light government promised to construct 400,000 new apartments annually. However, this target is conspicuously absent from the coalition agreement between the CDU, CSU, and SPD.
To put things into perspective, the Ifo Institute for Economic Research has uncovered a noteworthy decline in housing construction order situations throughout Germany. After exhibiting an initial surge of construction orders at the start of 2025, we've witnessed a notable drop in new contracts. To be precise, housing construction orders have slumped by 7.5% between January and February 2025 when accounting for price changes. Compared to the same period last year, there was a slight 0.5% contraction in orders. This downward trend suggests a clear weakening in construction demand, undermining any claims that the sector remains robust at present[2].
In terms of regional differences, Munich's housing construction order situation has shown considerably deterioration in February 2025, taking one of the steepest dives among German metropolises. This represents a significant shift from the past few months where demand had remained relatively steady[2].
This trend mirrors a larger pattern plaguing the German construction industry as a whole. Experts anticipate the sector will contract in real terms by 1.8% in 2025, marking the fifth consecutive year of decline. Contributing factors include inflated inflation rates, escalating construction material costs, and stagnant demand overall, particularly in residential and industrial construction. Moreover, political upheaval following the collapse of the federal government at the end of 2024 has led to delays in federal investment projects, compounding the predicament[4][2].
In conclusion, the current order scenario in housing construction in Germany, specifically Munich, presents a picture of faltering demand and dwindling new contracts, reversing earlier gains and reflecting ongoing challenges in the broader construction sector, as per the reports from the Ifo Institute and Klaus Wohlrabe.
In line with the present sentiment shift in the German housing construction sector, the finance aspect becomes increasingly crucial. The upcoming proposal by Germany's new Housing Minister, Verena Hubertz, may potentially address the financial challenges through state guarantees to support new apartment financing. However, the order scenario remains dire, with over half of the companies in Germany grappling with a lack of orders. This trend is evident in Munich, especially, as the city experiences a significant contraction in housing construction orders.
