January 18, 2018 / 10:54 AM / 4 months ago

German property boom to boost construction sales to 23-year high

BERLIN (Reuters) - German construction companies expect sales to grow by 4 percent this year, reaching their highest level since 1995, industry associations said on Thursday, suggesting the sector will continue to propel growth in Europe’s biggest economy this year.

FILE PHOTO: A construction site at the river Spree is pictured in Berlin, Germany November 27, 2017. REUTERS/Hannibal Hanschke/File Photo

Germany is enjoying a construction boom due to higher state spending on roads and bridges, increased company investment in buildings, and a real estate bonanza.

The construction boom has been encouraged by the European Central Bank’s ultra-low interest rates, a growing urban population and high immigration over the past five years.

The ZDB and HDB construction associations said in their joint forecast that nominal sales would rise by 4 percent to 117.2 billion euros in 2018, close to levels last seen during the boom times following unification and the economic upswing in East Germany in the mid-1990s.

“Construction companies are confident about the year 2018,” said Peter Huebner, president of the HDB association, which represents large industrial construction firms such as Hochtief (HOTG.DE).

“The order books are well-filled,” said Hans-Hartwig Loewenstein, head of the ZDB association, who speaks for more than 35,000 small- and medium-sized firms that form the backbone of Germany’s construction sector.

    Sales in residential construction are expected to grow by 3.5 percent to 43.1 billion euros this year. Company investments are seen rising by 4 percent to 41.2 billion euros while state spending on roads and bridges is forecast to increase by 4 percent to 32.9 billion euros.

    With construction prices expected to rise by 3.5 percent this year, however, overall sales in real terms are likely to grow by only 0.5 percent to reach 98 billion euros ($120 billion), the associations added.

    Employment in construction is expected to rise by 15,000 to 820,000 people, although a growing number of companies are struggling to find skilled workers, they added.

    “There are now two vacancies for every unemployed construction engineer,” Huebner said. “At some point we won’t find any unemployed engineers at all; we’ll have full employment here.”

    Construction was one of the main growth drivers in Germany last year when the euro zone’s largest economy expanded by a calendar-adjusted 2.5 percent, the strongest since 2011. For 2018, the Ifo institute has forecast 2.6 percent growth.

    ($1 = 0.8185 euros)

    Additional reporting by Michael Nienaber; Editing by Gareth Jones and Angus MacSwan

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