Decline in Nominal Construction Volume Expected for the First Time since the Financial Crisis; Residential Construction Situation Worsening

Martin Gornig and Laura Pagenhardt

DIW Weekly Report, 2024, vol. 14, issue 1/2, 3-14

Abstract: High construction prices and worsened financing conditions are weighing on the construction industry, especially build-ing construction. Despite a nominal increase of six percent in construction expenses in 2023, it decreased by just over one percent in inflation-adjusted terms. In 2024, the nominal construction volume is likely to contract by around 3.5 percent, declining for the first time since the financial crisis due to falling construction prices. Residential construction in particular experienced a sharp decline in 2023 and will continue on this downward trend more strongly in 2024. Renovation and modernization activity is less affected than new construction. The situation will stabilize by 2025. The prospect of constructing 400,000 new residences annually is thus becoming increasingly out of reach. Only civil engineering is stabilizing the construction industry overall; it is likely to expand in both 2024 and 2025. The different growth prospects of the sectors require restructuring in the construction industry. In particular, capacities freed up in new residential construction should be utilized in the energy-efficient renovation of private and public buildings. Policy makers should actively support this restructuring. In addition, they should provide clarity about the subsidy programs for energy-efficient building renovation and residential unit construction. At the same time, it is important to maintain focus on the new housing construction target.

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: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.890625.de/dwr-24-01-1.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:dwr14-1-1

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 ().