Gloomy prospects for housing construction in Germany despite strong demand in many regions: After a collapse in building permits in 2023 to their lowest level in more than ten years, the already tense situation threatens to become even worse. “The lack of building permits will lead to a lack of apartments in the coming years and will further heat up the market,” warned the Central Association of the German Construction Industry.
According to preliminary data from the Federal Statistical Office, approvals from building authorities fell by 26.6 percent to 260,100 apartments last year. The last time the number was lower was in 2012, when it was 241,100 units. The federal government’s original target of 400,000 new apartments per year is a long way off.
Exact figures at the end of May
The building permits say nothing about how many apartments were actually built last year – the Federal Statistical Office is expected to announce figures on this at the end of May. However, the permits are an important indicator of future construction activity.
According to estimates by the Ifo Institute, 270,000 apartments were built last year. For the current year, the Munich Economic Research Institute expects only 225,000 completions. At the same time, there is a severe housing shortage in many cities, which has recently driven up rents sharply.
Private builders and companies are particularly concerned about increased interest rates for real estate loans and higher construction prices. Many projects are being postponed or canceled, especially in housing construction. The Ifo business climate in residential construction fell to its lowest value ever measured in January. “The outlook for the coming months is bleak,” said Ifo survey director Klaus Wohlrabe recently. There were no new orders and at the same time further projects were being cancelled, and more than half of the companies surveyed complained about a lack of orders.
Association: Federal government must step on the gas when it comes to housing construction
The industry also criticizes sometimes inadequate funding offers and high government taxes. This refers to government-related costs when building apartments, such as property transfer tax, sales tax, technical building regulations or energy requirements. “Building is actually impossible today,” said the President of the Central Real Estate Committee, Andreas Mattner, recently.
The GdW Federal Association of German Housing and Real Estate Companies demanded that the federal government finally step on the gas when it comes to housing construction. “We are in a deep housing crisis. The measures introduced by the government so far are obviously too slow and too little,” said association President Axel Gedaschko. “We need a large-scale interest subsidy program for affordable housing – now.”
The construction industry called for the Growth Opportunities Act to be passed quickly. “The building contractors are fighting for their existence with their employees and have no understanding of political games,” said Felix Pakleppa, general manager of the Central Association of the German Construction Industry. The Union is linking its approval in the Federal Council to the compromise negotiated by the Mediation Committee to the government withdrawing the planned cuts in agricultural diesel subsidies.
Permits for one- and two-family homes have fallen
The statisticians’ figures include both building permits for apartments in new buildings and renovations. Last year, a total of 214,100 apartments were approved for new residential buildings. That was 29.7 percent less than the previous year. The number of building permits for single-family homes (minus 39.1 percent to 47,600) and two-family homes (minus 48.3 percent to 14,300 apartments) fell particularly significantly. These types of buildings are generally constructed by private individuals. According to the information, around two thirds of new apartments in Germany are being built in apartment buildings, which are predominantly built by companies. Here the number of approvals fell by 25.1 percent to 142,600 apartments.
“The reality is a crippling combination of persistently high construction costs and interest rates coupled with a lack of funding. As a result, almost no one can currently build, especially not affordable for the middle class,” said Gedaschko, describing the current situation.