The sentiment within the residential construction sector worsened again in March. The corresponding Ifo business climate index dropped from -17.7 to -19.5 points, reflecting noticeably more pessimistic expectations regarding the sector’s future. However, the assessment of the current situation improved somewhat. Klaus Wohlrabe, who leads the Ifo surveys, noted, “Concerns about rising interest rates weigh down expectations in residential construction. Higher financing costs are expected to dampen the ambition of many households to build their own homes”. On the other hand, there are initial positive signs in the operational aspects: the order situation is slowly easing. The proportion of companies reporting insufficient orders dropped significantly to 43.4 percent, marking the lowest rate since July 2023. This improvement is attributed to a recent rise in building permits. Furthermore, cancellations also decreased, recently standing at 10.8 percent. According to Wohlrabe, “The order situation is gradually improving, but uncertainty remains high”.
Interest Rate Worries Dampen Housing Sector Mood Index
