Germany’s construction sector growing

A survey from credit insurance company Euler Hermes has found Germany’s construction sector is likely to continue a positive trend of 3.5% growth this year.

This comes despite pressure on some firms’ profit margins from rising costs of energy and materials, according to the latest study.

The results of the survey concluded that sales could reach a total figure of €285 billion this year and improve further in 2015. Researchers believed the improved picture had been driven by factors including an improving property market.

This has seen house prices rise in Germany by around 6% during the past year, with the sector benefitting from low interest rates.

However, the Hermes study warned that a potential housing bubble as property prices continue to outstrip wage growth, could be the biggest barrier to continued growth.

Its findings were supported by reported forecasts earlier this year from Germany’s HDB and ZDB construction groups. Both organisations had indicated a positive trend within the industry, which built on construction sales figures that had risen 2.5% in 2013.

Subsequently, the Institute for Economic Research’s president, Hans-Werner Sinn, sounded a note of caution for the German economy last month.

He revealed that factors including the Ukraine crisis and trade sanctions imposed on Russia could potentially have a negative influence on the overall German economy.

Despite such uncertainties, Hermes chief economist Ludovic Subran believed that the construction sector remained in a positive state.

He said, “The construction sector in Germany is booming.

“This growth stems almost exclusively from the private house-building segment. Public investment meanwhile is lagging far behind. Besides the generally positive economic trend, the reasons for the strong demand are record low interest rates, low equity financing requirements, low unemployment, higher German purchasing power on the back of rising wages and stronger immigration.

“These factors make property an attractive investment – Germans are showing a preference for investment in ‘concrete gold’ over equities, which are seen as risky.”