New apartment construction permits falter once more
In the rapidly deteriorating residential construction sector, no signs of recovery are on the horizon, quite the contrary: The Federal Statistical Office revealed that the number of building permits issued in April dropped by a staggering 17.0% or 3600, leaving a total of 17,600 permits. From January to April, a total of 71,100 housing units received approval, marking a 21.0% decrease or 18,900 fewer compared to the same period last year. The high cost of materials and increased borrowing costs are causing many potential builders and investors to back away.
The most significant decrease was observed in the first four months for single-family homes, with a drop of 32.5% to 12,300 permits. For two-family homes, a 18.3% decrease to 4400 was reported. The number of permits issued for multi-family homes, the most common type, also saw a significant decrease, with permit issuance falling by 20.2% to 38,500.
The business climate in the residential construction industry showed a slight improvement in May, even with persistent order backlogs, as the Ifo Institute's business survey reported. The business climate index rose from a dismal -52.3 in April to -46.4 points in May. Both current business situation evaluations and expectations for the coming months improved, but still at an incredibly low level.
"Homebuilders might have weathered the worst," said Klaus Wohlrabe, head of the Ifo Surveys. "The road to recovery is still long." The persistent order backlog remains a major issue: In May, 51.7% of companies reported a decrease in orders, down from 55.0% in April.
Even with cancellations, there's no reason for optimism yet: In May, 15.1% of companies reported cancelled projects, down from 17.6% in the previous month. "Many companies are trying to combat the order backlog with price cuts," said Wohlrabe. (Story by Rene Wagner, edited by Kerstin Doerr - For inquiries, please contact)
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Due to the surge in expensive building materials and elevated borrowing costs, many prospective builders and investors are reluctant to pursue apartment construction projects, necessitating the need for more affordable and accessible building permit options. Consequently, the high costs associated with obtaining expensive apartment building permits continue to discourage potential development, contributing to the overall decline in the residential construction sector.
