Stopped projects: More cancellations in housing construction

Status: 10/11/2022 10:33 AM

More and more projects by builders do not make it to completion. According to the ifo institute in Munich, there is a veritable wave of cancellations in housing construction. Rising interest rates and costs are the cause.

Rising construction costs and increasing interest charges on loans are leading to a significantly higher number of canceled construction projects. The ifo Institute announced this today. According to this data, 16.7 percent of companies surveyed were affected by order cancellations in September. In the previous month of August, only 11.6 percent of companies had reported cancellations. Last year this percentage was on average less than five percent, in the pre-Corona period up to 2019 only between one and two percent.

“Builders pull the string”

The ifo researchers see a whole bundle of factors for the current development. These are, for example, the exploding material and energy prices, which have led to significantly higher construction costs. But the rising financing interest for construction loans is also causing more and more builders to withdraw from their projects. “For some builders, all this is no longer feasible. They postpone projects or pull the rope completely,” says Ifo expert Felix Leiss.

The business expectations of companies in the industry have fallen accordingly. According to the ifo institute, they fell to minus 53.2 points, which is “extremely weak” and corresponds to the lowest level since 1991. “Companies still have large order reserves on average, but worries about the future have rarely been so great,” say the IFO. the researchers. Expectations were at their lowest level since the survey started in 1991.

The fact that the dream of owning a home is becoming increasingly difficult for more and more Germans is also reflected in the falling demand for real estate financing. Savings bank president Helmut Schleweis told Handelsblatt newspaper that the demand “slumped overnight”. Many projects in the planning phase would be cancelled. According to Schleweis, the cause is uncertainty due to various crises and further increases in material costs.

Construction rates are getting higher

Mortgage interest rates have risen sharply in recent weeks. According to “Finanztest” magazine, they have now risen to well above three percent with a ten-year fixed interest rate – with a usual three percent repayment rate and 80 percent financing. The average interest rate for this is 3.4 percent, according to Finanztest. Mortgage loans were last this expensive in 2011.

The fact that many home builders are still planning their construction project is shown by the increasing popularity of savings contracts. A relatively low interest rate for a new construction project, but also for an energetic renovation, can be fixed by means of building savings.

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