German construction 1998-2008

German construction will shrink by 5 percent during 1998. After the building boom of the 1990s, construction will contract to a volume of approximately DM 350 billion per year.

The drop expected for 1998 results from the sharp downturn in residential construction, which is expected to slow by 10 percent from DM 128 to 115 billion. This applies especially to apartment building construction, which will shrink from a volume of DM 50 to 33 billion, a decrease of 17 percent.

Other sectors of Germany's building sector will decline, as well. This across-the-board slowdown up until the year 2002 results from the following factors:

• West German residential construction has slumped. Even though demand for housing continues to be high, German project sponsors in this sector are uneasy about the future. Sponsors are concerned about the future of interest rates and the record level of unemployment in the country, so the housing market is sluggish. Apartment building construction will be especially hard-hit during 1998. German residential construction activity continues to be at a high level, so the downturn ahead should be seen more as a correction, a return to "normal" market conditions, than a genuine housing crisis.
   
• The new "Eigenheimzulage" housing regulations, which are intended to aid families' efforts to purchase or build their own homes, have yet to bear fruit, because the target group, young families, do not have the money to investment in their own homes at present. This tendency is especially evident in east Germany, where real wages continue to be lower than to the west, and where unemployment is considerably higher than next door.
   
• Declining commercial construction activity across Germany. German commercial construction is expected to slow in the next few years, even though the German economy is growing. This macroeconomic growth results from the success of German firms on their international export markets. As growth continues to be found abroad, German firms will increase their investment emphasis on foreign makets, especially the America and Asia.