German Building Permits Plummet: Unveiling the Causes

Hat Update August 18, 2023 0

Decline in German Building Permits Linked to High Costs and Financing Challenges

German Chancellor Olaf Scholz is expected to meet stakeholders later in September to try to find solutions to the slump © Rupert Oberhäuser/picture alliance

Recent data from Germany's Federal Statistical Office (Destatis) reveals a concerning dip in building permits, primarily attributed to elevated construction expenses and challenging financing conditions. This trend is notably impacting various German cities grappling with surging rents and housing prices.

Throughout the initial half of 2023, housing authorities in Germany sanctioned the construction of 135,200 apartments, marking a notable drop of 50,600 building permits compared to the corresponding period in 2022.

Im 1. Halbjahr 2023 wurde der #Bau von 135 200 #Wohnungen genehmigt. Das waren 27,2 % oder 50 600 Baugenehmigungen weniger als im 1. Halbjahr 2022. Im Juni 2023 sank die Zahl der Baugenehmigungen für Wohnungen gegenüber dem Vorjahresmonat um 28,5 %. Mehr: https://t.co/fwQNwvLNDY pic.twitter.com/KznMixcynk

— Statistisches Bundesamt (@destatis) August 18, 2023

Noteworthy is the month of June, which experienced a substantial decline of 28.5%, with only 21,800 approved dwellings compared to the same month in the preceding year.

Destatis acknowledges that the decrease in building projects can be attributed to the mounting costs of construction and increasingly unfavorable financing terms. This phenomenon is especially apparent in the permits for new residential buildings and existing ones.

An overview of the building permits data demonstrates a decline across all building types. Between January and June, a total of 111,500 new residential building permits were granted, registering a nearly 31% decrease from the same period the prior year.

Single-family house permits dropped by 35.4%, while the number of approved dwellings for two-family houses saw a substantial 53.4% decline.

As the numbers slide, calls from industry players and political figures have emerged, urging Berlin's intervention and support for the sector. An upcoming meeting with Chancellor Olaf Scholz is eagerly anticipated, wherein potential measures may be discussed.

Amidst these developments, the German property landscape faces mounting concerns. Numerous property developers have recently declared insolvency, signaling further distress.

Tim-Oliver Mueller, the head of the German Construction Industry Federation, laments, "The first half of 2023 presents a rather grim outlook for residential construction."

German Construction Minister Klara Geywitz acknowledges that the coalition government is likely to fall short of its ambitious goal to construct a minimum of 400,000 new apartments annually.

A combination of soaring real estate prices and escalating loan interest rates has rendered homeownership unfeasible for many Germans. This leaves a significant proportion with limited options, often resorting to older homes equipped with outdated fossil fuel heating systems.

Notably, vulnerabilities within the real estate sector are also surfacing in countries like the United States and China, underlining a broader global concern.