The mood in Germany's residential construction sector weakened at the close of 2025, reflecting ongoing structural challenges. The Munich-based Ifo Institute reported that its business climate index for the sector fell from -19.3 points in November to -20.6 points in December. Companies surveyed cited a decline in both current conditions and expectations for the coming months.
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Order books continued to shrink, with 47.7% of firms reporting a lack of new contracts, up from 47.0% the previous month. Cancellations also edged higher, rising to 11.5% from 11.0%. Klaus Wohlrabe, head of Ifo surveys, explained that despite a recent rise in building permits, demand has yet to translate into tangible business improvements. "Housing construction isn't really getting off the ground. Many companies are still waiting for a noticeable increase in demand," Wohlrabe said. He noted that it typically takes three to six months for newly issued permits to result in actual projects for construction firms.
The data highlights the sector's persistent structural problems, which continue to weigh on sentiment despite efforts to stimulate activity. Analysts warn that until demand increases, companies may struggle to improve profitability or expand operations.
While some optimism has emerged in previous months, the overall picture remains cautious, with the Ifo Institute emphasising that regulatory, financial, and market challenges will likely limit growth in early 2026.
The report underscores that Germany's residential construction sector will need sustained support and rising orders to shift sentiment back into positive territory.
Source: www.moebelmarkt.de
