German Residential Construction Outlook Bleak, Ifo Survey Finds

Germany’s residential construction sector outlook remained bleak amid rising cancellations and record low business expectations as high inflation, rising interest rates and less subsidies damp activity, results of a survey by the ifo institute showed Monday.

Cancellations in the German residential property construction grew further in November, with the survey showing that the share of surveyed companies affected rose to 16.7 percent from 14.5 percent in the previous month.

“Companies still have well-filled order books,” ifo researcher Felix Leiss said.

“But constantly climbing construction prices, higher interest rates, and fewer subsidy options are weighing on new business.”

The ifo survey also showed that business expectations for the next six months hit a record low in November. The corresponding index dropped to minus 60.9 points, the lowest figure since the survey began in 1991.

“The business outlook for residential construction appears bleak, with a majority of companies fearing declines in the coming six months,” Leiss said.

Meanwhile, pricing intentions eased only slightly with the relevant index dropping to 45.4 points, still very high, from 51.0 in the previous month.

Many businesses are having to opt for further property price increases to pass on high material and fuel costs to customers, despite already weakened demand, ifo said. Construction prices are still rising, Leiss added.

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