Germany market intelligence: as markets cool, new opportunities arise
Our latest report finds that demand in the German construction sector is declining, with the market showing signs of cooling. Prices are flatlining, and there are limited expectations for significant gains in 2024. However, with various areas of the market demonstrating growth, there are opportunities available for contractors who are willing to adapt to new sectors.
Market conditions turning from warm to cold
The German economy has been relatively stable over the past year. Quarterly Gross Domestic Product (GDP) results remained almost unchanged until Q4 2023, where GDP dropped 0.3 percent after two consecutive stagnant quarters. Rising construction prices have also slowed in the last year, with the quarterly rise dropping to around 0.5 percent for the first time since Q4 2020. Along with the continued decline of the number of contracts quarter on the quarter, the construction industry in Germany is seeing a cooling off period.
Less contracts leads to weak tender conditions
The current market sentiment is that tendering conditions are lukewarm to cold, with contractors noting a distinct reduction in tendering activities. Material prices seem to finally have stabilised and coupling this with a cooling market, 2024 may start to see some relief from the sharply rising prices that have been visible since the beginning of 2021. The volume of building and construction activity permits issued in Germany also decreased by more than 20 percent during 2023.
Despite the number of projects and permits reducing, there are still pockets of growth, especially for the current industrial and infrastructure outlook.
A cooling market leading to stagnating prices
With the German economy stagnating and the potential of a slight regression, it is expected that prices will follow suit. Rising expectations from clients that prices should fall, coupled with a diminishing number of available projects, is causing the anticipated price regression. However, due to rising labour costs, political instability and further supply chain challenges, we predict that tender price inflation may ease over 2024, with prices likely to stagnate.
