The downward trend in the construction industry continues to accelerate. The number of building permits fell again drastically at the end of last year. The hope is that interest rates will fall this year.
Germany is falling further and further behind its own housing construction goals. As the Federal Statistical Office announced, the number of building permits for new apartments continued to decline in November. It fell to 20,200, which means a decrease of 4,100 approvals or 16.9 percent compared to the previous year. Approval numbers have been declining at double-digit rates for months.
In addition, the industry’s decline is accelerating: in October the decline compared to the previous year was 11.5 percent. From January to November 2023, there was a decrease of 25.9 percent to 238,500 apartments. Construction Minister Klara Geywitz (SPD) recently said that she expected around 270,000 new apartments to be completed in 2023.
Construction industry demands Bureaucratic reform
The main reasons for the downturn in the construction industry are expensive building materials and high interest rates. The key interest rate of the European Central Bank (ECB) is currently 4.5 percent. A year ago this was 2.5 percent. However, interest rate cuts are expected on the financial markets from summer at the latest, which will make building financing noticeably cheaper.
“The industry needs investment incentives for more affordable housing,” demanded Tim-Oliver Müller, managing director of the German Construction Industry Association. An interest reduction program and a simplification of bureaucracy would be helpful. “Standards and building requirements must be reduced, the way for serial construction and renovation must be cleared, digital building applications must be introduced and uniform, digital administrative processes must be established nationwide,” said Müller.
The forecast for the current year doesn’t look any better
The federal government has set itself the goal of 400,000 new apartments every year. This number is likely to be clearly missed in 2024 too. The German Institute for Economic Research (DIW) assumes that 265,000 apartments will be built this year. In 2022, 295,300 apartments were completed.
There is a particular lack of affordable housing for low-income people: According to a study by the “Social Housing” alliance, which includes several social associations, there are 910,000 social housing shortages. Geywitz speaks of a big gap: “There have been times in the Federal Republic of Germany with three million social housing units,” said the minister tagesschau24. At the end of 2022 there was according to an industry study around 1.088 million social housing units.
Permits for detached houses are plummeting
Approvals also fell sharply in other areas of the construction industry. From January to November there was a decline of 38.6 percent in single-family homes to 44,500, and in two-family homes there was a decline of 49.2 percent to 13,300. The number of multi-family homes fell by 23.8 percent to 130,400.
The only plus in the current statistics was for dormitories: there the number of permits rose by 29.4 percent to 8,500. The latest figures from the Federal Statistical Office are partly based on estimates because there were no figures for November from Lower Saxony.