German construction at highest levels for 20 years

The German construction industry has the highest level of orders on its books for 21 years, according to the country’s main industry association. Turnover increased by 8% in the first nine months of 2016, headed by residential construction (up 15.4%), commercial property (up 4%), and public building (up 8%).

The industry had new orders of €36.7bn for the first three quarters, figures last seen in the post-reunification boom year of 1995. Total turnover volume for the full year is expected to reach €110bn.

Residential construction is expected to rise a further 8% this year (2017), while public building is still suffering from permit-issuing and personnel bottlenecks at municipal levels, according to Heiko Stiepelmanm, deputy CEO of Germany’s Construction Industry Federation (Deutsche Bauindustrie). “The market is heading upwards everywhere, but it’s being held back at the municipal planning stage”, he said in a media interview. He warned about investors hoarding land in anticipation of further rising prices.

The industry expects to construct up to 290,000 new housing units this year, and up to 320,000 next year, although it and Germany’s federal housing ministry under Barbara Hendricks acknowledge that between 350,000 and 400,000 new housing units are needed annually.

In the wider industry, Germany continues to power ahead economically, despite Brexit, Trump, and forthcoming European elections. Germany's Federal Statistics Office Destatis confirmed last week that German GDP expanded by 1.9% last year, up on the 1.7% in 2015 and the strongest rate in half a decade. Growth was particularly strong in the final quarter, at 0.4% double the third quarter rate, after the Brexit vote, while the country also recorded a third successive year of not needing new government borrowing, with a public sector budget surplus of €6.2bn.

Germany’s growth has been powered by increased employment, rising wages and higher spending linked to the country’s task of absorbing about 1.2m migrants since last year. Unemployment is at a record low and the number of people in work is at its highest since German reunification in 1990.

Private consumption rose 2.4%, while public consumption, boosted by refugee expenditure, climbed 4.2%, said Destatis, the government’s statistics agency. Strong domestic consumption played a “critical role”, Dieter Sarreither, head of the agency, said. Exports, which hit a record in November, were another bright spot, rising 2.5% year on year.