Many consumers felt the effects of the skyrocketing prices, especially for building materials, during renovations or new builds last year. The price development also has clear consequences for the construction volume.
According to calculations by the German Institute for Economic Research (DIW), inflation and supply bottlenecks have halted the construction boom in Germany. In 2022, inflation-adjusted construction volume fell for the first time in many years, the DIW announced on Wednesday. Residential construction in particular was disproportionately affected by the declines. The construction volume is not expected to grow again until 2024, adjusted for inflation.
According to the DIW, the construction volume increased nominally, i.e. in current prices, by 13.6 percent. However, construction in 2022 was characterized by sharp price increases, which caused sales to skyrocket on paper. If you factor out the strong price increases, according to the DIW, there is a minus of 2 percent. In the case of new residential construction, the construction volume even fell by 4.5 percent. According to figures from the Federal Statistical Office, incoming orders also fell significantly in the first ten months, adjusted for calendar and price changes – this is also reflected in the tense situation in the construction industry.
Missed target again?
A trend reversal is initially not in sight: the federal government originally set the goal of building 400,000 new apartments per year. However, the Central Association of the German Construction Industry expects that only 245,000 apartments will be completed this year. That would be another 12 percent fewer than forecast for 2022 (around 280,000). The target of the federal government would again be clearly missed.
The authors of the DIW study describe their expectations for the future in a similar way: They expect investors to be more cautious in the current and next year due to poorer financing conditions and political uncertainty. “Adjusted for inflation, the construction volume will probably still be negative this year and will only be positive again from 2024, but even then residential construction, especially new construction, is likely to lag behind the overall development,” says study author Martin Gornig.
He therefore calls for a change of strategy. Although the federal government has already decided on measures for tax incentives for housing construction, it must focus more on densification in existing buildings in order to create affordable new living space, especially in metropolitan areas. In addition, the companies would have to be promoted in order to be able to build up capacities. Bottlenecks in supply and thus price increases could be counteracted in this way.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
