Construction Slump Persists in Thuringia's Residential Market
The construction sector in Thuringia, Germany, is grappling with a persistent slump in residential orders, as revealed by the State Statistical Office in Erfurt recently. Between January and September, approximately €132 million worth of residential construction orders were received - a marked decrease of over 30% compared to the same period in 2022.
However, the context is not uniform across all sectors. Public construction and road building, for example, have experienced an upward trend, with incoming orders increasing by 21% to €1.1 billion during the first nine months of the year. In commercial construction, the order books maintain their buoyancy, mirroring the levels seen in 2022.
Overall, the construction industry as a whole reported an 8% increase in orders for the initial nine months of the year. Companies have also witnessed a slight uptick in turnover, with a 1.5% rise in revenues, totaling around €1.8 billion. The situation for residential construction is gloomy, but commercial construction companies remain resilient and are continuing to maintain order books at previous levels.
On the flip side, public construction and road building orders have displayed notable growth, climbing by 21% since the start of the year. This upward trend in orders for infrastructure projects may be a sign of continued investment in vital services and infrastructure.
Background Information
The decline in residential construction orders can be attributed to various factors. For instance, the astronomical levels of inflation in the German economy have led to increased financing costs and construction prices. This surge in costs has made residential construction less enticing for households, exacerbating their ability to invest in housing construction.
Additionally, the economic stagnation and inflation have triggered significant income losses for households, further limiting their resources to invest in residential construction. The divergent pathway observed in construction, with civil engineering experiencing growth, is evident from the fact that new orders in civil engineering have exceeded their end-of-2021 levels, reflecting investments in general infrastructure.
Surveys conducted by the ifo Institute suggest that roughly 39% of companies in the construction sector faced a lack of orders as of the fourth quarter of 2024, underscoring the declining residential construction activity.
In contrast, the growth in public construction and road building orders likely stems from ongoing investments in infrastructure projects. The notable increase in new orders for civil engineering, including the construction of roads and railway lines, further supports this notion.
