Germany

Overall construction activity

Preliminary figures for 2020 from the Stats Office show a growth of 1.5 % in real terms in total investment in construction, despite the economic recession caused by the Corona-crisis which led to a decline of 5% of GDP (in real terms). With an increase in gross value added and employment, the construction sector was a stabiliser for the entire economy.

The new all-time high of the volume of gross-fixed capital formation construction amounted to €386 billion. The growth was fuelled both by building (plus 1.4%) and civil engineering works (plus 2.2%). The increase in overall employment in the construction sector lagged slightly behind with a growth of 0.7%, especially due to a persisting lack of skilled construction workers.

Other than in the previous years, expectations for the construction sector in 2021 are less positive than for the total economy. Economic research institutes predict a real growth rate for GDP of about 3%. The construction federations expect total construction investment to grow at a rate of nearly 1% in real terms. Thus, the volume at current prices is expected to reach a level of €398 billion.

In 2020, new orders for the construction industry had a value of €86 billion, the same figure as in 2019. The volume of permits for new buildings (excluding civil enginee­ring) was close to €100 billion due to rising construction prices.

Housebuilding

The biggest subsector (more than 61% of total construction investment) reached the bottom of economic development in 2009. Since then, it is an ongoing success story. Until 2020, investment grew by 39% in real terms. The number of flats and houses coming new to the market doubled to nearly 300,000 units.

The most important reasons for this development have not changed. The high number of immigrants (more than 3 million in the past 10 years), record low mortgage rates, extremely high demand for new flats in agglomeration areas, rising disposable incomes of private households and the search for investments with higher yields than the capital market has to offer.

Between 2009 and 2020 investment into new houses more than doubled in real terms. Never­theless, the subsector stood for just one third of total investment in the residential sector last year. Housebuilding is still dominated by renovation and repair works, although the growth rate was far less impressive with only 18%.

Political aims concerning the housebuilding sector focus on two issues. First, to bring the number of new flats and houses to a level of 375,000 units per year. To reach this goal, the federal government enacted several subsidies in 2018 in order to support the construction of family or multifamily houses. Second, to reduce CO2 emissions from the building sector. Since the implementation of the subsidy scheme in 2006, the state-owned KfW-Bank has injected nearly €62 billion into the market for investment into the existing building stock (especially better insulation and modern heating systems). On the other hand, the regulations for energy saving building methods in new construction have been tightened constantly. The last legislative step in 2016 resulted in an increase in investment costs of almost 10%.

It is expected that in 2021 about 300,000 flats or houses will be finished. Once again, the target of about 375,000 units will be clearly missed. Therefore, prospects for the future remain positive despite future consequences of the COVID-19 pandemic.