Unprecedented German building boom continues

The German construction industry continued to see double-digit growth in the first half of this year, with little sign yet of a fall-off in activity, encouraged by rising rents and cheap financing for building.

The homebuilding boom has largely been driven by public investments in new apartment building, with municipally-owned housing construction jumping 30% from just a year ago, according to data released by Destatis, the German Federal Statistics Office.

The authorities have issued 10.8% more home building permits for the first half than for the same period a year ago. A total of 124,900 approvals were issued in the first six months. Particularly benefiting were multi-family homes, whose approvals rose 21.7%, with two-family home approvals rising by 13.9%. Single family homes saw only a 1.5% increase in permits issued.

However, new permits for non-residential buildings fell by 10.2% in the same period, with approval for particularly hotels falling by 31.4% and those for factories and other industrial buildings dropping by 23.4%.

The German figures are in stark contrast to the level of European residential construction in Europe as a whole. A study released this summer by EU association Euroconstruct shows that European residential construction is set to fall to the lowest level in 20 years, with an expected fall of 2.8% over last year, largely due to public sector budget cuts. It expects new home construction to rise in 2014, but for 2013 the number of homes coming onto the market in the 19 countries it monitors will amount to 1.31m, the lowest since the fall of the Berlin Wall in 1989.

According to the Euroconstruct researchers, “Austerity measures are mainly dampening civil engineering, while the weak overall economy along with high unemployment and a lack of consumer confidence dampens the prospects for housing and non-residential construction."

The European public debt crisis has had a disproportionate impact on the civil engineering sector, which has now been shrinking for four years. The sector has declined by one-fifth from 2009 when it was still enjoying the support of budgetary stimulus. Extensions and renovation of infrastructure projects have been consistently delayed, leading to overloads in some areas. Public bodies, especially in northern and central Europe are aware of this and are planning to increase investments, with Germany and Norway already clear exceptions to the construction malaise in most other countries.

Euroconstruct is more optimistic about 2014.
"The European economic recovery is being delayed despite the improving international framework and increasing economic activity in the US and emerging countries," Euroconstruct says. Unemployment is expected to reach its peak in 2013. Non-residential construction, especially commercial building and office, are especially under pressure. Germany is more in line with the rest of Europe in this respect, at least.