Rewritten Article
Hesse's construction sector is facing a steep loss in earnings, particularly in residential construction. Here's the lowdown on the revenues tumbling in the housing sector.
In the first half of 2024, the construction sector in Hesse gathered a combined 2.6 billion euros, marking a 4.9% decrease compared to the same period a year prior. Sadly, residential construction took the heaviest blow with a 12.1% decrease, landing at a revenue of 0.6 billion euros.
Although the construction industry exhibited some improvements in order flow during the initial half of 2024, the workforce count plunged by 3.2%, leaving approximately 33,000 employees. These numbers are for companies with a minimum of 20 staff members.
Earlier on, the Association of South West German Housing Companies (VdW) raised concerns about a precipitous drop in building permits issued in Hesse. In the first half of 2024, a whopping 26.5% fewer permits were granted compared to the previous year, which was more significant compared to 2022, with a decrease of 41.8%. The association highlighted fierce price competition in the sector, as construction and maintenance costs had skyrocketed.
Despite the slight improvement in order flow, the steep decrease in residential construction revenues—as stated by the Hessian State Statistical Office—raisots concerns. The sharp decline in building permits, as foretold by the Association of South West German Housing Companies, further emphasizes the importance of careful analysis of the statistics in the construction sector.
General factors affecting residential construction revenue decline worldwide include:
- Higher-for-longer borrowing costs: In some countries, such as the United States, higher interest rates have significantly impacted housing construction confidence and starts, as seen in the NAHB/Wells Fargo Housing Market Index (HMI) drop to 42 in February 2025, with a 13-point plummet from 59 to 46 on future sales expectations.[1]
- Regulatory and permitting issues: In states like Massachusetts, the lengthy and complex permitting process is identified as a primary hindrance to housing production, leading to delays and increased costs.[2]
- Tariff concerns: Tariff uncertainties can impact builder sentiment, as observed in the NAHB survey where responses received before and after the tariffs were paused showed contrasting levels of confidence.[1]
- Energy and building code complexities: Overly intricate energy codes and building regulations can boost construction costs and reduce the appeal of new projects, as mentioned in the Massachusetts study.[2]
- Economic uncertainty: In countries like Germany, economic uncertainty and high financing costs are pointed out as factors affecting the construction sector, particularly in housing construction, where demand remains weak despite some stabilization in new orders and building permits.[4]
