Actively countering declining construction activity now
The mood in the construction industry has de-teriorated massively over the course of 2022. The Russian war of aggression on Ukraine has significantly increased economic uncertainty, made energy significantly more expensive and caused material and construction prices to rise substantially. By contrast, construction permits and new orders are declining sharply. In 2023, no more than 250000 new homes are likely to be built, far from the target of 400000 set out in the coalition agreement. The German Federal Association of Building Materials - Stone and Earth (bbs) is therefore very cautious about the newly started year.
“Special times require not only special measures, but also decisive political action,” says Dr. Matthias Frederichs, bbs Director General. Energy supply in particular is a major concern for the building materials industry. Although the energy price brakes have been able to extinguish some fires, the instruments are nevertheless too complicated and do not utilize the full scope of EU state aid law, he says. Current prices are unlikely to become a permanent reality, according to the association. “In international comparison, 7ct for gas and 12 ct for electricity are far from competitive levels. Since gas storage facilities will have to be refilled by the end of 2023, it will take all available capacity on the grid to relieve the pressure on gas-fired power generation. Renewables urgently need to be further expanded, but a temporary continued operation of nuclear power plants as well as an expansion of domestic natural gas production must also be examined with an open mind and without ideological reservations,” Frederichs said.
On the demand side, the bbs expects declining construction investments in all construction sectors in 2023. This also affects the area of energy-related building refurbishment and the expansion or upgrading of public infrastructure. “The foreseeable construction crisis not least also jeopardizes the climate targets of the federal government and ensures a further aggravation of social imbalances in the housing market,” says Frederichs. In order for construction to continue to play its role as a pillar of the economy, targeted measures are needed, such as the simplification of regulatory requirements, a significant increase in the volume of new construction subsidies and the expansion of the planned home ownership subsidies with a view to strengthening the equity base. In the area of energy-efficient modernization, the introduction of new time-limited subsidy instruments, such as a modernization child allowance, would make sense in line with the ambitious climate targets for the building sector. Public investments should be adjusted to price developments in the interest of a functioning infrastructure. In view of the tight state finances in times of crisis, Frederichs points to the role of the construction sector as an economic engine: “The entire construction value chain makes a lasting contribution to the modernization of our economy and could be a pacemaker for social transformation and greater resilience. The funds would therefore be invested in a future-proof way.”
In addition, the bbs supports the German government’s plan to relaunch the national raw materials strategy. The first key points from the Federal Ministry of Economics, which only inadequately address the extraction of domestic mineral raw materials, are therefore all the more critical. For Frederichs, one thing is certain: “Without mineral raw and construction materials, there can be no successful energy, transport and construction turnaround.” The title of the coalition agreement, “Daring to make more progress,” must now be placed more firmly at the center of the political agenda, he says. The roadmaps of individual building materials sectors on decarbonization and resource conservation show what daring progress can look like. They show how climate protection and competitiveness can work together. Proposals from industry and the construction sector are also on the table for CO2 capture and the circular economy. These must now be implemented.