Construction Boom Coming to an End; Change in Policy Strategy Needed

Martin Gornig and Laura Pagenhardt

DIW Weekly Report, 2023, vol. 13, issue 1/2, 3-14

Abstract: Following the construction boom of recent years in Germany, inflation and supply bottlenecks hit the industry hard in 2022. While nominal construction volume increased by nearly 14 percent, it decreased by two percent when adjusted for inflation. Residential construction, which is urgently needed, was particularly affected. In 2023 and 2024, it is expected that investors will show restraint and that nominal construction volume will only grow by four to five percent due to rising construction costs and worsening financing conditions. However, the core construction industry should also benefit from the upturn in construction activity, particularly in commercial and public sector construction. The decrease in real construction volume is putting policymakers under enormous pressure and requires a strategy change. Key policy goals can only be achieved if construction capacities are significantly expanded, not shrunk. Policy should focus in particular on incentives for the redensification of existing buildings, for energy-efficient refurbishment, and for expanding municipal infrastructure.

Keywords: Construction industry; residential construction; public infrastructure; economic outlook (search for similar items in EconPapers)
JEL-codes: E32 E66 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.863048.de/dwr-23-1-1.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwdwr:dwr13-1-1

Access Statistics for this article

DIW Weekly Report is currently edited by Tomaso Duso, Marcel Fratzscher, Peter Haan, Claudia Kemfert, Alexander Kritikos, Alexander Kriwoluzky, Stefan Liebig, Lukas Menkhoff, Karsten Neuhoff, Carsten Schröder, Katharina Wrohlich and Sabine Fiedler

More articles in DIW Weekly Report from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().