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Real estate crisis: wave of insolvencies hits construction companies
Read why 630 real estate companies in Germany had to file for bankruptcy and how the industry is preparing for a long-lasting crisis. Everything in this recent article by Amy Walker.
Real estate crisis: wave of insolvencies hits construction companies
The real estate industry in Germany is being rocked by massive bankruptcies. In the first quarter of 2024, 630 companies in the real estate sector had to file for bankruptcy. This marks an increase of 18.6 percent year-on-year and 17.3 percent more than the previous quarter. In the entire year of 2023, there were a total of 1,997 bankruptcies of real estate companies in Germany.
Experts such as Christian Alpers, head of the Real Estate division at Falkensteg, predict a further increase in insolvencies in the industry. Alpers assumes that the crisis will last until at least 2026 and that bankruptcies will increase by double digits. Large companies with annual sales of over ten million euros are particularly affected by the wave of bankruptcies.
The current construction crisis, triggered by dramatic increases in housing construction costs, has unsettled investors and made it more difficult to create affordable housing. Important funding programs have expired, while the European Central Bank has increased key interest rates, making property purchase unaffordable for many. Thomas Reimann, CEO of ALEA Hoch- und Industriebau GmbH, spoke about the drastic decline in building permits compared to the previous year.
Despite the pessimistic outlook, there is a ray of hope in sectors such as energy renovation, heating construction, solar companies and craft businesses. These sectors are experiencing an upswing and have had very few bankruptcies in the last twelve months. However, bankruptcies have not only increased in the real estate industry, but also across sectors, with a total of 4,520 bankruptcies in the first quarter of 2024.