The results of a study published by the DIW economic institute showed that construction spending is expected to fall for the first time since 2009 in 2024, which will deal another blow to the German real estate sector, which is already facing its worst crisis in decades amid high interest rates on loans and growing insolvency of developers.
According to DIW forecasts, construction volume will fall by 3.5% this year, but there will be a slight recovery in 2025 (+0.5%).
"The slump in the construction industry is taking longer than expected," said Laura Pagenhardt, an author of the study.
Meanwhile, according to the latest HCOB PMI survey, German construction activity remained in decline as 2023 drew to a close, with the sector continuing to be buffeted by a combination of market uncertainty and high interest rates. The survey also pointed to a bleak outlook for 2024, with business expectations remaining historically low. The Construction PMI rose to 37.0 in December from 36.2 in November. Despite the rise, the latest reading was still the second-lowest in a little over three-and-a-half years and indicative of a steep rate of contraction.