Construction permits fall sharply in the first half of the year
High material costs and challenging financing options continue to deter many potential homeowners and investors. The number of building permits is still declining, and the government's targets appear to be significantly missed.
The permits for the construction of apartments have collapsed in the first half of the year. They fell by 21.1 percent from January to June compared to the previous year, or by 28,500 to 106,700, as reported by the Federal Statistical Office. The trend continued to show a clear downward trajectory: In June alone, there was a decrease of 19.0 percent to 17,600 apartments. Compared to June 2022, this was even 42.1 percent less. High financing and construction costs are cited as reasons for the downward trend. Industry associations also complain about excessive bureaucracy.
"The current level of building permits corresponds to only slightly more than 200,000 newly built apartments per year," said Sebastian Dullien, scientific director of the Institute for Macroeconomics and the Business Cycle (IMK). "This means that the German housing market will continue to struggle." The federal government aims for 400,000 units per year.
The decline in building permits for new single-family homes was particularly strong in the first six months of the year: here, there was a collapse of 30.9 percent to 18,600. For two-family homes, a decrease of 14.9 percent to 6,600 was reported. The number of building permits for multi-family homes, the most numerous type of building, also decreased significantly: here, it went down by 20.8 percent to 57,300 apartments.
The prospects for a turnaround in the second half of the year are not particularly good. In July, more than half of the construction companies reported a shortage of orders in residential construction, according to a new survey by the Munich IFO Institute. In total, this was 51.3 percent, after 50.2 percent in June. "What is not ordered today cannot be built tomorrow," commented Klaus Wohlrabe, head of IFO surveys, on the development. "This is also reflected in the forecasts for the number of newly built residential buildings."
The Federal Statistical Office reported a 21.1% decrease in building permit approvals for apartments from January to June 2023, compared to the same period in 2022. Despite these low numbers, Sebastian Dullien from the Institute for Macroeconomics and the Business Cycle stated that the German housing market will continue to struggle, as the federal government's target of 400,000 units per year remains significantly unmet.
