Sentiment within the German housing sector showed marked improvement in July, according to data released Friday by the Ifo Institute. The Ifo Business Climate Index for residential construction rose from -31.4 to -25.2 points.
The increase stems from a less pessimistic outlook regarding future business expectations, coupled with a slight brightening in assessments of the current situation. Klaus Wohlrabe, head of the Ifo surveys, stated that companies within the sector are “cautiously optimistic” though he cautioned that “we are still far from optimism – the situation has eased somewhat, but dissatisfaction remains high.
The proportion of companies reporting order shortages decreased from 47.9% to 46.1%, the lowest level since August 2022. The cancellation rate also fell, moving from 9.0% to 8.2%. “The trend is in the right direction, but the housing sector needs more than political announcements” Wohlrabe explained. “Recovery can only become sustained if the promised boost to housing construction actually materialises”. A lasting improvement will also depend on the development of financing costs in light of recent interest rate reductions.