German construction to decline in 2024 – DIW

German construction spending is set to decline in 2024 for the first time since the financial crisis, Reuters reported citing a DIW study.

The volume of construction would decrease by 3.5 per cent in 2024 to 546 billion euros ($597.38 billion), then recover somewhat with a 0.5 per cent increase in 2025, the study predicts.

Due to low-interest rates and high demand, the real estate market in Germany and other parts of Europe flourished for many years. However, an abrupt increase in rates and expenses ended the run, forcing developers into bankruptcy as bank financing dried up and deals stalled.

German construction expenditures haven’t decreased since 2009.

“The slump in the construction industry is taking longer than expected,” said Laura Pagenhardt, study author.

Moreover, the serious situation facing the residential construction industry was further highlighted by a survey released on Wednesday by the Ifo Economic Institute, which revealed that sentiment in the sector was at an all-time low.

“There is as yet no sign that the situation is easing,” said Klaus Wohlrabe, head of surveys at Ifo, following the December mood, which was the lowest since the survey’s inception in 1991.

“These exceptionally weak expectations show that companies currently have no hope. The prospects for 2024 are bleak,” he added.

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