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As the economy struggles, Germany’s housebuilding sector is in a ‘confidence crisis’.

Germany’s housing construction industry is facing a tough time, with economic indicators painting a worrisome picture and industry leaders expressing concerns. According to Dominik von Achten, chairman of Heidelberg Materials, there’s a sense of crisis in the sector, with significant declines in the company’s business volumes in Germany.

In January, both the current sentiment and future expectations for Germany’s residential construction sector hit record lows, as reported by the Ifo Institute for Economic Research. The construction Purchasing Managers’ Index (PMI) for Germany also reached its lowest point ever, signaling a contraction in the industry.

This downturn isn’t just affecting construction; it’s also impacting Germany’s overall economy. Economic and Climate Minister Robert Habeck recently revised down GDP growth expectations for 2024 due to challenges like higher interest rates, which are leading to reduced investments, especially in construction.

While there are some signs of improvement, such as fewer companies reporting order cancellations, significant challenges persist. High interest rates and construction costs continue to burden builders, making it hard to anticipate a quick turnaround.

However, there’s a glimmer of hope on the horizon. Von Achten remains optimistic about the potential for interest rate reductions, which could boost confidence in the sector. He believes that if inflation decreases and the European Central Bank lowers interest rates, it could stimulate investment and restore confidence.

Although the timing of interest rate cuts remains uncertain, there’s anticipation in the market for the first decrease to occur in June. Despite the challenges, there’s a belief that with favorable economic conditions, confidence in Germany’s housing construction sector will gradually bounce back.

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