Sentiment within the German housing sector appears to have improved noticeably in July, according to data released Friday by the Ifo Institute. The Ifo Business Climate Index for residential construction rose from -31.4 to -25.2 points.
Businesses expressed less skepticism regarding future prospects and a slight brightening in their assessment of the current situation also contributed to the overall gain. Klaus Wohlrabe, head of the Ifo surveys, stated that companies within the housing sector are cautiously optimistic, though he cautioned that a full recovery remains distant. “The situation has eased somewhat, but dissatisfaction remains high” he noted.
The percentage of companies reporting a shortage of orders decreased from 47.9% to 46.1%, the lowest level since August 2022. The cancellation rate also fell, moving from 9.0% to 8.2%. Wohlrabe emphasized that while the trend is positive, more than just policy announcements are needed to support the sector. “A sustained recovery can only occur if the intended boost to housing construction truly takes effect” he said. The development of financing costs in light of recent interest rate cuts will also be a key factor in achieving lasting improvement.
