Sharp rise in bankruptcies in the construction and real estate sector
According to credit insurer Allianz Trade, the turnaround in interest rates and the sharp rise in material costs have triggered a wave of bankruptcies in the construction and real estate sector. The subsidiary of insurance giant Allianz in Hamburg reported that bankruptcies in the German construction and real estate industry had already increased by 8 percent in 2022 - and by 20 percent in the year to date up to and including August 2023.
"The two sectors thus account for more than a fifth (21 percent) of all insolvencies in Germany." According to the data, the increase in bankruptcies in the real estate sector has been particularly strong at 42 percent.
"For a long time, things went like clockwork in large parts of the German construction industry - thanks to the low-interest phase. The turnaround came with the rise in interest rates," say the analysts at Allianz Trade. "The construction industry is currently in a slump: high interest rates and a massive increase in material costs are leading to construction stops, cancellations and, most recently, late payments and insolvencies."
"Many construction projects are on hold due to higher interest rates and material costs - with visible consequences for project developers, construction companies and, above all, the housing market," said Milo Bogaerts, head of the credit insurer in the German-speaking region. "The order situation is hitting many project developers and construction companies hard, as they have had virtually no new orders for months."
According to Bogaerts, SMEs are often the hardest hit. "As subcontractors, the many medium-sized companies in particular are often in a kind of sandwich position with little pricing power vis-à-vis large clients." This makes them particularly vulnerable in the event of a deterioration in the order situation and the economy.
The economic situation in the construction and real estate sector is significantly impacted by the rise in interest rates and material costs, leading to a surge in bankruptcies. As a result, the real estate sector has seen a striking 42% increase in bankruptcies.
Source: www.dpa.com
