Germany’s residential construction sector was again hit by a wave of cancellations in October, according to a survey published on Monday that showed a record number of firms reporting abandoned projects.
In October, 22.2% of companies reported canceled projects, up from 21.4% the previous month, the ifo Institute (Leibniz Institute for Economic Research at the University of Munich) said.
“It’s getting worse all the time, with more and more projects failing due to higher interest rates and elevated construction prices,” says Klaus Wohlrabe, ifo head of surveys.
“In residential construction, new business remains very low, and companies’ order backlogs are diminishing.”
The number of companies reporting a lack of orders also increased in October, to 48.7% of firms from 46.6% in September.
A year ago, in October 2022, that proportion was just 18.7%.
“Nearly half of all residential construction companies are now suffering from a lack of orders, and that number is growing every month,” said Wohlrabe.
The real estate sector was a bedrock of Germany’s livelihood for years. Fueled by low-interest rates, billions were funneled into the property market, which was viewed as stable and safe.
Now a sharp rise in rates and building costs has put an end to the run, tipping developers into insolvency as bank financing dries up, deals freeze, and prices fall.