Material shortages in construction are at their highest and prices are going through the roof. The result is canceled orders, especially in residential construction, reports the Ifo Institute.

The lack of material in construction is worse than it has been for more than 30 years. In building construction, the proportion of companies that reported bottlenecks in a survey by the Ifo Institute increased by 2.4 points to 56.6 percent, as reported by the Munich Economic Research Institute.

This is the highest value since the survey began in 1991. In civil engineering, the share fell minimally to 44.8 percent – the second highest value ever determined here. However, experts from the strategy consultancy EY-Parthenon are confident about medium-term growth in building construction.

Structural steel and bitumen are particularly scarce

“With the Russian attack on Ukraine, the supply problems for building materials have worsened drastically,” said Ifo researcher Felix Leiss. “Structural steel, which was often imported from Russia or the Ukraine, is particularly scarce at the moment.” There are also problems with bitumen, bricks and insulating materials are rare. The shortage makes building more expensive: “Material prices continue to rise as a result of scarcity and higher energy costs,” said the expert.

According to the Ifo, most of the building construction companies reported that they had recently raised prices. Further steps are planned in the coming months. There were also increases in civil engineering in many places. Leiss said that rising construction costs and higher interest rates were increasingly leading to the cancellation of orders, especially in residential construction. In May, 13.4 percent of building contractors reported this, in April it was 7.5 percent and in March 4.6 percent. According to the Ifo, it was 8.8 percent in civil engineering, after 9.3 percent in April. Overall, according to the Ifo, the order books are still full.

Experts forecast moderate growth

According to a forecast by the strategy consultancy EY-Parthenon, there will be moderate growth in building construction in the coming years – despite scarce and expensive building materials, a shortage of skilled workers and economic risks. In addition to the lack of living space, the main drivers are energetic renovations for climate protection, according to the consultants. The enormous need for renovations with insulation, solar roofs and heat pumps is driving the industry in the long term, said Björn Reineke, partner at EY-Parthenon. “The craft is busy for years.”

Construction companies are reaching their limits

According to the forecast, the volume of construction work performed should grow by an average of around 1.8 percent per year until 2024, adjusted for price. The prerequisite is that the Ukraine war does not have an unexpectedly drastic impact. A recession in Germany could change the picture. Construction companies are currently reaching their limits, reported Reinke. The range of orders to be processed is up to five months.

According to EY, building construction in Germany grew by 1.1 percent in real terms in 2021 compared to the previous year. Private residential construction remained a pillar, growing more strongly than commercial and public construction. Catch-up effects due to the corona pandemic also helped significantly.