High inflation, rising interest rates and increasing requirements are slowing down the construction of new apartments in Bavaria. According to the Immobilienverband Deutschland Süd (IVD Süd), 30 percent fewer building permits were issued in the first half of the year than in the same period last year. Between January and June, only around 25,000 new residential units were approved for construction across Bavaria. This development should lead to a noticeable increase in prices for rental apartments, said the head of IVD-Süd market research, Stephan Kippes, on Monday in Munich.
Building permits in Bavaria have been significantly lower since last autumn, and “the trend curve continued to point downwards in the second quarter of 2023,” said Kippes. With just under 12,000 building permits, the second quarter was the weakest in three years. “Continuedly rising interest rates, strict lending criteria, persistently high inflation, project costs that are difficult to calculate and high requirements in new construction create a significant braking effect on urgently needed housing construction,” said the market researcher.
At the same time, projects that have already been approved are increasingly being shelved. Developers find it difficult to assess what purchase price the market is willing to pay when the property is completed. However, the population in metropolitan areas is growing. Prospective buyers who cannot fulfill their dream of owning their own home pushed their way onto the rental market. “Noticeable increases in rents will make it even more difficult for many households, not just those with low incomes, to find a suitable rental apartment,” said Kippes.