Study: Bankruptcies in the construction and real estate sector have increased sharply

According to the credit insurer Allianz Trade, the change in interest rates and the sharp increase in material costs have triggered a wave of bankruptcies in the construction and real estate sector. Bankruptcies in the German construction and real estate industry had already increased by 8 percent in 2022 – and by 20 percent in the year to date up to and including August 2023, reported the subsidiary of the insurance giant Allianz in Hamburg.

“The two sectors account for more than a fifth (21 percent) of all insolvencies in Germany.” According to the information, the increase in bankruptcies in the real estate sector was particularly strong, at 42 percent.

“For a long time, things ran smoothly in large parts of the German construction industry – thanks to the low interest rate phase. The turnaround followed with the rise in interest rates,” say the analysts at Allianz Trade. “The construction industry is currently at a low point: high interest rates and massive increases in material costs are leading to construction stops, cancellations and, most recently, late payments and bankruptcies.”

“Many construction projects are on hold due to higher interest rates and material costs – with visible consequences for project developers, construction companies and, above all, the housing market,” said the head of the credit insurer in German-speaking countries, Milo Bogaerts. “The order situation is hitting many project developers and building contractors hard, as they have had virtually no new orders for months.”

According to Bogaerts, medium-sized companies are often the hardest hit. “As subcontractors, many medium-sized companies in particular are often in a kind of sandwich position with little pricing power compared to large clients.” This makes them particularly vulnerable if the order situation and the economy deteriorate.

Study (in English)