Construction industry 2023 - Construction industry collapses - Housing construction in free fall - Bankruptcies loom
Published on: July 26, 2023 / Update from: July 28, 2023 - Author: Konrad Wolfenstein
Construction 2023 – Construction industry collapses – Housing construction in free fall – Image: yuttana Contributor Studio|Shutterstock.com
Challenges in the construction industry: Measures to strengthen the construction industry
We are currently facing major challenges in the construction industry caused by rising interest rates for construction financing, persistent inflation and reduced government subsidies. These factors have led to a noticeable decline in orders, which is 5.7% compared to the previous year. However, we also see that there is a slight increase in orders compared to the previous month, although this is due to two additional working days. Nevertheless, the construction industry assumes that the bottom will be reached in the fall and that bankruptcies in the industry will increase. Companies in the new construction and shell construction sector are particularly affected, as they are recording a significant decline in residential construction orders. Given this situation, it is crucial that the government acts urgently and takes appropriate measures to support the housing market and prevent further crises.
Effects of rising interest rates and inflation
The ongoing increase in interest rates for construction financing is making it difficult for many potential builders and real estate developers to realize their projects. Rising interest rates lead to higher overall costs for construction projects and have a negative impact on profitability. This makes investment in housing less attractive, leading to a decline in demand for construction services.
Additionally, ongoing inflation is impacting the construction industry in many ways. The increased costs for materials and labor are putting pressure on companies and leading to increased financial pressure. As a result, many construction projects become more expensive than planned, which also has a negative impact on profitability. It is important that the industry takes action to overcome these challenges and maintain its competitiveness.
Decrease in government subsidies
Another crucial factor for the current situation in the construction industry is reduced government support. Previously granted subsidies and funding have enabled many companies to implement their projects and offer economically viable solutions. But due to the reduction or elimination of these subsidies, many companies are faced with financial bottlenecks.
Measures to strengthen the construction industry
Given these challenges, there is an urgent need for the government to act proactively and take appropriate measures to support the construction sector and save the industry from an even deeper crisis. Below are some suggestions:
1. Increasing lending opportunities
To provide financial flexibility to companies in the construction industry, the government should increase lending options. This could be done through special loan programs or grants that are specifically tailored to the needs of the industry. This would allow companies to gain easier access to capital and implement their projects despite rising interest rates.
2. Reduction in interest rates for construction financing
A reduction in interest rates for construction financing would be an important step in restoring the attractiveness of investments in housing construction. Lower interest rates would reduce the overall cost of construction projects and thus improve profitability. This could help stimulate demand for construction services and revive the construction industry.
3. Exemption from real estate transfer tax
Another way to reduce the burden on builders and real estate developers would be to temporarily exempt property transfer tax. This would reduce the costs of acquiring land and thus expand the financial scope for construction projects. It could also help stimulate housing construction and encourage the development of new housing projects.
Outlook
The construction industry is currently facing major challenges caused by rising interest rates, inflation and reduced government subsidies. It is vital that the government acts quickly and takes targeted measures to support the industry and support the housing market. The proposed measures, such as increasing lending options, reducing interest rates on construction financing and exemption from real estate transfer tax, could help stimulate the construction industry and prevent further crises.
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