Business Climate Improves in Residential Construction in Germany

Strategic Insights -

The German residential construction sector has seen a slight improvement in its business climate, with the ifo Business Climate Index rising from -31.4 to -25.2 points in June. This marks the highest level since September 2022. Despite this positive trend, companies remain cautious and continue to face challenges such as unsatisfactory order situations and high financing costs for living space. The sector is slowly recovering, but experts stress that sustaining this growth will require more than just announcements and policy statements.

Key Takeaways:

  • The ifo Business Climate Index for residential construction in Germany rose from -31.4 to -25.2 points in June, its highest level since September 2022.
  • The share of companies with a lack of orders fell from 51.0 to 47.9%, indicating initial signs of easing after a year and a half of consistently high rates.
  • Companies are still suffering from cancellations, with 9.0% of companies reporting canceled projects in June, up from 8.6% in May.
  • Residential construction is heading in the right direction but needs more than just announcements and policy statements to sustain recovery.
  • Experts stress the need for the housing construction sector to "really take off" and for financing costs for living space to decrease.
  • Klaus Wohlrabe, Head of Surveys at ifo, emphasizes that the road back to normality is still long, and the recovery can only be sustained with significant improvements in the sector.

Statistics:

  • ifo Business Climate Index for residential construction in Germany: -31.4 (May) to -25.2 (June) points.
  • Share of companies with a lack of orders: 51.0% (May) to 47.9% (June).
  • Companies reporting canceled projects: 8.6% (May) to 9.0% (June).
  • Key interest rate cuts leading to reduced financing costs for living space.

Sources:

  • ifo Institute
  • "Business Climate Improves in Residential Construction in Germany" (ifo press release, July 16, 2025)
  • ifo Institute: "Business Climate Improves in Residential Construction in Germany" (ifo website, July 16, 2025)
  • More Information Survey (ifo website, July 16, 2025)