According to the Federal Statistical Office, building permits fell in April more than they had in more than 17 years. The reason for this continues to be the exploding construction costs and high interest rates. Criticism of the federal government is getting louder from the industry.
Demand and supply continue to diverge on the German housing market: In April, the construction of 21,200 apartments was approved. According to the Federal Statistical Office, that was 9,900 fewer building permits than in April last year – a drop of 31.9 percent. The authorities announced today in Wiesbaden that this was the strongest decline compared to the same month last year since March 2007.
The number of building permits for two-family houses fell particularly sharply in April, collapsing by around half. Single-family houses fell by 33.5 percent compared to the same month last year and multi-family houses, the largest type of building in terms of numbers, fell by a good 27 percent.
ifo Institute expects even more drastic decline
According to the statistics, the number of building permits has been falling since May 2022, despite high demand for living space. The Federal Statistical Office cites the high costs of building materials and increasingly poor financing conditions as the main reasons for the decline. Because of the sharp rise in interest rates on loans and high building prices, many builders are holding back on projects or canceling them – from private house builders to large investors.
The ifo Institute in Munich expects an even more drastic decline in residential construction in Germany in the coming months. According to the researchers, only around 245,000 apartments in new buildings will be completed this year and only 210,000 in 2024.
The German Construction Industry Association (HDB) expects at best 250,000 completed apartments this year. That would be around 45,000 fewer than last year and far from the federal government’s target. The traffic light coalition had published the target of 400,000 new apartments per year.
real estate association blames the federal government
The real estate association ZIA expects a gap of up to 700,000 residential units and 1.4 million apartment seekers for 2025. The causes are the lack of construction projects due to skyrocketing construction prices and state regulation mania. “The state is responsible for 37 percent of the costs of living as a product,” said ZIA President Andreas Mattner of the “Bild” newspaper, according to a preliminary report.
Ifo construction expert Ludwig Dorffmeister also blames the federal government for having “drastically cut back” the new building subsidy and “tightened the standards for new construction again” at the beginning of 2023.
According to the ZIA, there are huge housing gaps, especially in the big cities: According to data from the real estate market observer Empirica Regio, more than 23,000 apartments were missing in Berlin alone at the beginning of 2023. This makes the capital the sad leader. Also in Hamburg there are 13,632 apartments too few and in Munich more than 10,000 apartments are missing.
Construction projects in the high-price segment are canceled less often
According to the Munich ifo Institute, the vast majority of property developers have not initiated any new projects for many months. The orders currently booked are for projects that are too far advanced to cancel. In addition, according to ifo, there are still construction projects in the high-price segment, for whose customers the increased costs do not play a major role.