Construction of new buildings experiencing smaller rate of decrease compared to traditional construction methods
In 2024, the construction of single-family modular homes in Germany experienced a decline, with around 14,300 completions, marking a 14.9% decrease compared to the previous year. This drop can be attributed to several economic factors and shifting trends in the construction industry.
One of the key reasons for the decline is weak demand coupled with higher personnel expenses and economic uncertainties. The Zumtobel Group FY 2024/25 report revealed a notable negative volume development in segments linked to construction, affecting profitability and activity levels.
Increased labor costs have also weighed on construction economics in Germany, offsetting any material cost benefits and reducing the incentive to expand modular single-family home projects. Broader recession risks, inflationary pressures, and delays in tariff relief have further prolonged headwinds for spending in residential construction. High interest rates and stabilized electricity prices have dampened residential market growth, likely including modular home demand.
There is a trend toward growth in non-residential construction sectors, such as education, health, commercial & industrial buildings, where modular construction is increasingly applied. This shift may have diverted resources and investment away from single-family modular homes towards other uses.
Competitive landscape and technological factors also play a role. While modular construction overall is expected to rise in market share by 2026, immediate challenges such as supply chain agility, integration of AI tools for cost control, and competition for high-growth niches affect single-family segments. Supply chain and labor challenges are impacting modular home production momentum.
Policy and incentive changes have also contributed to the decline. Support schemes previously boosting residential construction have been phased out or reduced in Germany and Europe broadly, limiting subsidies and incentives for modular single-family housing.
In contrast, there were significant increases in modular student housing, with 60 student housing units constructed in 2024, an increase of 53.8% compared to 2023. The prices for single-family modular homes increased by 0.5% in 2024 compared to the annual average in 2023.
Despite these challenges, modular construction remains a relevant and potentially cost-effective and time-saving alternative in the construction industry. The decline in single-family modular home construction during 2024-2025 in Germany stems largely from economic slowdown effects, increased labor costs, shifts toward non-residential modular construction, and policy environment changes, creating a more challenging market despite technological advances and overall sector growth in modular methods.
Meanwhile, conventional construction continued to see an increase in building prices. The building price index for residential buildings in conventional construction was at plus 2.9% in 2024. In conventional new construction, around 7,100 two-family homes were completed, a decrease of 26.7% compared to the previous year. Fewer single-family modular homes were built in 2024 than in 2014, marking a 1.9% decrease in total completions over this time period.
Overall, the construction industry in Germany continues to face challenges, with economic factors and shifting trends impacting both modular and conventional construction. However, the potential benefits of modular construction, such as cost savings and time efficiency, make it an attractive option for the future.
- In contrast to the decreasing trend in single-family modular home construction, there is a growing interest in non-residential sectors like education, health, commercial, and industrial buildings, where the application of modular construction is increasing.
- The Zumtobel Group's FY 2024/25 report highlighted that segments linked to construction, especially residential construction, experienced a notable negative volume development, which affected profitability and activity levels, thereby impacting the finance and business aspects of the construction industry in Germany.
