The construction party is over.

Real estate developers are putting projects on hold, young families are giving back land because they can no longer afford their dream of owning their own home in view of the sharp rise in construction costs and interest rates, and orders are being canceled in droves.

War in the Ukraine, inflation, building costs that are getting out of hand and now horrendously high energy bills have brought the boom to a halt.

Bernd Freytag

Business correspondent Rhein-Neckar-Saar based in Mainz.

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Ilka Kopplin

Business correspondent in Munich.

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Susanne Preuss

Business correspondent in Hamburg.

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In June – there are no more recent figures at the moment – ​​incoming orders in the main construction trades fell by 13 percent in real terms.

The decline in residential construction at 18 percent is particularly striking.

However, the picture is hardly different for commercial and even road construction: the builders are stepping on the brakes.

According to a survey by the Ifo Institute, the mood in the main construction trades in July was worse than it had been for six years.

Expectations are characterized by great pessimism.

Profit from falling prices

Private builders could even benefit from this development in the long term.

Because the slump in demand should sooner or later relax the supply chains.

The sometimes drastically increased material costs, but also the costs for the construction work would have to decrease.

According to figures from the Central Association of the German Construction Industry (ZDB), wood alone had become more expensive by more than 60 percent in the previous year, reinforcing steel by half and plastic insulation by a good quarter.

According to the ZDB, the prices for building materials are at a historically high level.

The sharply rising energy prices are still preventing faster price declines for building materials.

And the decline in orders is still hardly noticeable, above all because the order books of construction companies are still well filled.

But the cushion will dwindle, month by month.

By the beginning of next year at the latest, material prices could also fall in construction, as a survey by the Frankfurter Allgemeine Zeitung shows.

According to Julia Möbus from the German Federal Association of the Sawmill and Timber Industry, the lack of timber should already be a thing of the past.

Customer warehouses are full, and existing orders are being canceled again and again, she says.

According to new figures from the association, the sawmills reduced their production by more than a fifth in July due to the weaker order situation – additional shifts were stopped, overhauls carried out that had been postponed for a long time.

And that, although the price-driving demand from abroad, especially from America, is still high.

"Wood is there," says Möbus.

She assumes that lumber prices will fall again - but when is not clear.

Steel is back

Markus Hartmann from the Association of Plastic Pipe Manufacturers reports something similar.

Even seemingly simple products such as plastic pipes have recently been scarce and expensive.

The situation has eased since the middle of the second quarter, and availability is improving, he says.

Raw material prices stagnated, albeit at a high level.

Due to the sharp rise in energy prices, the price level for the pipes themselves is also still high.

Although the pipe manufacturers' production is 100 percent electrified, so a possible gas failure would not affect them, the high electricity prices are still driving up production costs.

Apparently, the 60 medium-sized pipe manufacturers are not afraid of a decline in production as with wood.

The association assumes that large quantities of cable protection pipes will be required for the construction of the planned high-voltage lines from northern to southern Germany.

The additional demand would also keep prices high for private builders.  

The Bauforum Stahl, the interest group for the structural steel industry, is signaling relaxation.

According to a spokeswoman, the Ukraine war and the subsequent delivery failure from Ukraine, Russia and Belarus have now been compensated.

"Meanwhile, the supply chains for steel have been rearranged, steel is available again in any quantity."

According to estimates by the manufacturers' association, the effect of the price increases caused by the Ukraine crisis has largely dissipated.

However, the future price development is difficult to assess, since the production costs are very heavily dependent on the energy price development.