BERLIN (dpa-AFX) - According to a study, the crisis in residential construction could hit the entire German economy hard. In economic terms, the sector is almost as important as the entire automotive industry, the consulting firm DIW Econ determined on behalf of the German Housing Construction Association. A collapse could result in losses of billions for the economy and a drop in tax revenues for the state. Industry associations warned in Berlin on Thursday of a "fatal development in which the crisis in residential construction threatens to trigger a domino effect and thus massive damage for large parts of the economy".

According to DIW Econ, a subsidiary of the German Institute for Economic Research (DIW), every seventh euro of the overall economic gross value added is directly or indirectly related to housing construction. Around one in seven jobs and 17 percent of tax revenues are also linked to this sector.

Many residential construction companies are currently pessimistic about the future. They are complaining about a lack of new orders and cancellations of already planned projects. Construction projects have become much more expensive over the past two years due to the sharp rise in interest rates on loans and construction costs. According to forecasts, the number of new homes built each year could fall by 35% by 2026 compared to last year.

The alliance of associations, which brings together the German Tenants' Association and IG BAU as well as associations from the housing and real estate industry, the masonry brick industry and the building materials trade, has therefore called on federal and state politicians to take action. The industry is in a deep crisis and must be supported with an immediate special demand. Specifically, annual subsidies of 23 billion euros are needed for 100,000 new social housing units and the construction of 60,000 new affordable homes./tam/DP/stk