Near Germany’s southern border, a small family-run construction company is being flooded with orders for its pre-fabricated homes. They are destined to house some of the one million asylum seekers flooding into the country this year.
The family factory in Neukirch cannot keep up so company chief Joerg Bauer is expanding near the shores of Lake Constance.
“We are about to introduce a double-shift at our plant in Neukirch, open a bigger factory building in nearby Lindau and increase our staff from 40 currently to 60,” he said.
Demand for entry-level homes for the refugees, many of whom have been sleeping in gymnasiums, local halls and tents, is adding to a cocktail of factors fuelling a revival of the German construction industry.
The sector is also being buoyed by population growth in major cities plus an increasing interest in real estate. Record-low borrowing costs and rising real wages are encouraging many Germans to overcome their traditional aversion to buying their own flats and houses, with some also regarding property as an attractive investment.
This demand, coupled with a €13 billion push by the government in 2016 to modernise roads and bridges, is expected to boost construction sales by 2.5 per cent to €235 billion next year, the highest level since 2000, according to the industry's BvB association.
Construction accounts for four per cent of German gross domestic product (GDP) and, with 2.5 million people working in more than 300,000 companies, it is a major employer.
"More and more Germans are putting their money into property," said Hans-Werner Sinn, head of the Ifo economic institute. Ifo’s construction sector index rose in November to its highest level since German reunification in 1990.
The index, which measures sentiment in the sector, dipped slightly this month but remains high as the European Central Bank's low interest rates turn more Germans away from regular saving funds and towards property investments.
Still, the construction industry has a way to go to match the boom it enjoyed when much had to be rebuilt in the former communist east Germany following reunification.
Turnover in core construction business has increased in the last few years but in 2014 remained about 15 per cent below levels of the mid-1990s. Housing remains in short supply due to a lack of construction in 2001-2009, when the public sector scaled back tax incentives for residential investors and abolished a home subsidy for owner-occupiers, who also faced much higher borrowing costs then.
From January to September this year, building approvals were granted for about 223,000 flats, the main dwellings in German cities, statistics office data shows. This marked a five per cent rise compared with the first nine months of 2014. For the full year, the figure is expected to be nearly 300,000 flats, but that is still insufficient to cope with the urban growth.
“It's still far below the levels we saw in the 1990s after reunification, with more than 600,000 flats,” said Tobias Just, a real estate expert at the University of Regensburg.
To avoid housing shortages – especially in big cities such as Berlin, Hamburg and Munich, more than 400,000 flats now need to be built every year, industry experts estimate.
The public sector is doubling its funds for social housing to more than €4 billion up to 2019 to cope with the asylum seekers.
At Bauer Holzsysteme, orders have been placed for more than 100 pre-fabricated buildings in 2016, up from 20 delivered this year.
Max Boegl, which is also making modular buildings for refugees, is experiencing the same upswing.
“We're noting sharply increased demand since October and we expect this trend to continue next year,” Max Boegl spokesman Juergen Kotzbauer said.