The number of building permits for apartments in Germany fell by around a quarter in the first half of the year. According to the Federal Statistical Office, the construction of 135,200 apartments was approved from January to June.
That was 27.2 percent or 50,600 fewer than in the same period last year. In June, the number of approved apartments was 21,800, a decrease of more than a quarter (28.5 percent) compared to the same month last year.
Building permits are an important indicator of housing shortages in cities. The figures include both building permits for apartments in new buildings and conversions.
“An immensely somber picture”
There are declines in building permits for all types of buildings, the statisticians continue. From January to June, 111,500 apartments were approved for new residential buildings to be constructed – almost 31 percent less than in the same period last year.
“The balance for the first half of 2023 shows an extremely bleak picture in residential construction,” said the construction industry association. An improvement is not in sight. “Particularly dramatic” is the situation in new homes.
According to the Federal Statistical Office, the number of building permits for single-family homes fell by a good third (35.4 percent). In the case of two-family houses, the number of approved apartments has fallen by more than half (53.4 percent). In the type of building with the most apartments, multi-family houses, the number of approved apartments shrank by a good quarter.
“Increasingly worse financing conditions”
After years of boom, the construction industry has been weak for some time now. The Wiesbaden statisticians put the reasons for this in a nutshell: “Increasing construction costs and increasingly poor financing conditions are likely to have continued to contribute to the decline in construction projects.”
The general manager of the main association of the German construction industry (HDB), Tim-Oliver Müller, made a similar statement: “Rises in interest rates, significant increases in construction costs, further increased energy requirements and uncertainty about further political action are creating an environment in which Investors continue to put the brakes on.”
Reference to KfW funding
There is no improvement in sight. Lobbyist Müller is therefore calling for a “package with clout” at the latest for the housing summit with Chancellor Olaf Scholz on September 25. The HDB’s wish list includes an expansion of the interest rate reduction program of the German Reconstruction Loan Corporation (KfW), better depreciation options, a reduction in real estate transfer tax and an investment subsidy for public housing companies.
The Federal Statistical Office also pointed out that housing subsidies for climate-friendly new buildings have been available from the KfW development bank since March. This funding can be applied for by private individuals for their own use or rental as well as by companies. However, there is still no clear effect of these measures on the number of permits.
housing goals in far distance
In fact, the number of building permits has been falling for months despite the high demand for housing. Federal Building Minister Klara Geywitz (SPD) has admitted that the traffic light coalition will miss its target of 400,000 new apartments per year.
The federal government therefore wants to slow down the decline in housing construction with tax breaks, among other things. Geywitz recently announced a package of measures for September and two weeks ago proposed degressive depreciation in residential construction. Builders could then write off 48 percent of the costs for tax purposes within the first eight years.
However, the financing is still unclear. Geywitz sees the proposals as part of Finance Minister Christian Lindner’s (FDP) planned “Growth Opportunities Act”. However, the adoption in the federal cabinet has been postponed due to a blockade in the traffic light coalition.
In addition, Geywitz wants to streamline the technical regulations, as she told the “Leipziger Volkszeitung”. “We have to build more simply again in Germany and curb the increase in costs.” She also relies on prefabrication in construction. “Serial housing construction is a way to build homes quickly.”
Industry appeals to politicians
The construction industry considers massive subsidy programs and tax breaks to be essential in order to get the crisis under control. “The air is getting thinner and thinner,” said General Manager Felix Pakleppa from the Central Association of the German Construction Industry (ZDB). “Apparently the explosive nature of this downward spiral has not yet reached everyone.”
With a view to the cabinet meeting at Schloss Meseberg at the end of August and the housing summit at the end of September, the ZIA said: “The next few weeks will bring the showdown – a restart of housing policy is imperative.” The cabinet had to make a decision in Meseberg: “Should the construction industry get the economy back on track or put its businesses and jobs on the sidelines?”
“There is an urgent need for a new start in housing construction policy,” says Andreas Mattner, President of the Central Real Estate Committee, in view of the upcoming cabinet meeting. Among other things, he also called for a large-volume loan program from the KfW development bank with favorable interest rates and a suspension of the real estate transfer tax.
“Not the whole truth yet”
“As bad as the numbers are, they still don’t show the whole truth that’s coming,” warned President Andreas Mattner of the Central Real Estate Committee (ZIA) lobby association. Project developers often end their preparatory work with a building permit. However, construction will only take place if it is not a negative business. But that is currently a frequent threat: “Unfortunately, the sum of all factors and in particular the explosively increased credit costs mean that these projects are on hold.”
Without reliable investment impulses, housing construction companies would have to cut jobs sooner or later, warned ZDB expert Pakleppa. “No one wants to imagine what that means for the housing market and the many other mega construction projects of the future.”
