Housing construction: tentative upturn: Is the turnaround in housing construction now coming?

Sentiment in the German residential construction sector brightened at the beginning of the second half of the year due to an improved order situation. The business climate barometer rose from minus 31.4 points in the previous month to minus 25.2 points in July, according to the Munich-based Ifo Institute's business survey on Friday. Companies are less skeptical, especially about the future. However, their assessment of the current business situation also brightened slightly.

"Residential construction companies are cautiously gaining hope," said Klaus Wohlrabe, head of the Ifo survey. "But we're still far from optimistic—although the situation has eased somewhat, dissatisfaction remains high."

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The proportion of companies reporting a lack of orders fell from 47.9 to 46.1 percent. This is the lowest level since August 2022. The cancellation rate fell from 9.0 to 8.2 percent. "The direction is right, but housing construction needs more than political announcements," Wohlrabe said. "The recovery can only be sustained if the housing construction turbo actually kicks in."

With the Turbo, the federal government aims to bring a breath of fresh air. This will give municipalities the opportunity to streamline permitting procedures by allowing them to deviate from development plans. The goal is to speed up construction, densification, and expansion. After a long crisis , residential construction is picking up again from a low level: The number of building permits grew by 2.9 percent year-on-year to 110,000 apartments in the first half of the year. However, a year earlier, it had fallen to its lowest level for the first six months since 2010. Higher interest rates and expensive building materials had brought the years-long construction boom to an end.

A sustained improvement will also depend on how financing costs develop in light of the recent key interest rate cuts, the Ifo Institute emphasized. The European Central Bank (ECB) has cut its key interest rate eight times since last year. Whether further steps will follow remains to be seen.

rtr/ms