Our figure of the month 11/2019: The construction sector – the support of the German economy
Development of building permits, construction completions and the accumulated construction backlog for new residential buildings and existing housing
Despite all reports about an economic crisis, the building industry in Germany continues to boom and is operating at full capacity. Due to immigration, favourite economic conditions (positive development of employment and earnings, resulting in increasing private consumer spending as well as low interest rates) and a high demand for (real estate) investments, the number of construction and extension projects in Germany remain on a very high level. The forthcoming climate protection law of the Federal Government will provide further incentives in conjunction with increasing energy efficiency – e.g. by replacing heating systems or optimising them. The finishing trade will in particular benefit from these measures. The latest population forecast for Germany predicts a population increase until at least 2024. Thus, the prerequisites for a high demand for construction of private dwellings remain very positive in the near future.
The positive picture is, however diminished by prevailing capacity bottlenecks within construction businesses, i.e. construction projects cannot be completed as fast as requested.
For years, building permits have exceeded construction completions. The figure above clearly indicates this with respect to the construction of new housing as well as measures for existing buildings. Construction projects that have been approved but have not yet been completed reveal the construction backlog. In fact, this backlog continues to grow steadily and will thus guarantee construction companies sufficient occupation for years to come. In 2018, the backlog amounted to just under 700,000 apartments and grew by 6% vs. 2017. Forecasts for the current year (2019) also assume that too few construction projects can be completed – taking into account this year's building permits alone. So the construction backlog will probably continue to grow in future – although at a reduced pace compared with previous years.
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