Building boom continues – but the end is inevitable

The construction boom is still in full swing. The most recent price developments with increases of 10% compared to the previous year also show that the entire boom in real estate continues at full speed. What madness! Data recently published today by the Federal Statistical Office show that incoming orders in the construction industry rose by 4.1% from August to September. In a year-on-year comparison from September 2018 to September 2019 it rose by 8.6%!

Permits for construction

A higher order intake in September was last seen 24 years ago (1995: 7.6 billion Euro). The volume of incoming orders has thus remained at a record level since December 2018. Compared with the same period of the previous year, new orders in the first nine months of 2019 rose nominally by 9.6%. So, we can say that the construction boom continues at full speed. But the end is inevitable. It seems like a small contradiction. Incoming orders are looking to the future, so what might be built in a year. And there the situation looks rosy. So why is the end of the boom preprogrammed?

Well, before the incoming orders for the construction of flats, for example, there are the official permits for the construction of flats. And the permits for new apartments were only published last week for the period January-September. Overall, they are down by 1.9% year-on-year. The most important part of these statistics, the permits for new flats in blocks of flats (i.e. normal flats in demand by the mass of people) are down by 3.4%. In the long term, therefore, growth in construction activity will no longer be sustainable. But well, such a long lasting boom cannot continue forever. It is important to recognize that construction cannot compensate for the weakness of industry forever. But if the construction boom weakens in, let’s say, 1 1/2 years, will the industry be running at full speed again by then?

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