Fear of inflation boosts German construction

Despite the continuing financial nightmare of the Eurozone, Germany’s construction industry is actually benefiting from the chaos. The reason? Investors inside and outside the country are increasingly looking to real estate as a hedge against the continent-wide increase in inflation caused by the debt crisis.

Over the first last nine months of 2011 homebuilding permits in Germany rose by an astonishing 22 percent, while those for apartments went up by 43 percent – the most in more than two decades. According to Heiko Stiepelmaan, deputy chair executive officer of the Construction Industry Association in Germany, it is the fear of inflation and a lack of other profitable and safe investing alternatives that has caused the rise. There are already signs that investors from southern European countries have started to buy up new property in the German market amid concerns that the single currency might fail, he says.

The increased demand has seen property prices in Germany climb by more than 4 percent in 2011 – twice the average annual increase of 1.9 percent from 2005 to 2010.  This construction growth could add further resilience to the German economy as the European Union slides towards another recession.

And while Germany’s construction industry is bucking the downward trend, the UK government has announced it is to spend €5.9 billion to improve the country’s infrastructure and boost construction. The plans announced by Chancellor of the Exchequer, George Osbourne, include a €1.2 billion injection into the rail network, in addition to 35 road and rail upgrades across the country. It is hoped that the investment will boost short-term activity in the UK and create thousands of jobs.

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