Reduction in issued construction permits implies weakness.
Germany's building permit trend continues to dip, missing the federal government's annual goal once more. However, there's a faint positive sign.
Despite the persistent housing shortage in numerous urban areas, the number of building permits issued in August decreased by 6.8% or 1,600, reaching 18,300, as per the Federal Statistical Office's records. From January to August, only 141,900 apartments were authorized - a decline of 19.3% or 33,900 compared to the same period the previous year. This decrease, however, is less severe than the 19% drop seen in the previous two months.
High financing and construction costs, coupled with excessive bureaucracy, are often cited as the culprits behind this prolonged downward spiral. The construction industry also voices concerns about the slow pace of approval processes. Unfortunately, a speedy turnaround does not seem imminent, as the residential construction order backlog has worsened.
In September, 52.9% of companies reported this issue, an increase from August's 50.6%, as per a survey conducted by the Munich Ifo Institute. "The central bank's interest rate cuts haven't shown any significant impact yet," noted Klaus Wohlrabe, head of Ifo surveys.
"Residential construction interest rates for households remain high." Ifo President Clemens Fuest also shares this sentiment, predicting that no construction boom will occur in 2025, with investments continuing to shrink. Only by 2026, with residential construction's long planning times in mind, might low interest rates provoke any meaningful impact.
Experts anticipate that the federal government will once again fail to meet its housing construction target for this year, which stands at 400,000 units per year.
The sharpest decline was witnessed in building permits for single-family homes between January and August; here, a decline of 26.6% to 25,300 units was observed. For two-family homes, a decrease of 13.9% to 8,700 units was reported. Even the numerically most popular type of building, multi-family homes, showed a significant decrease: here, the number of building permits dropped by 19.6% to 75,400 apartments.
Despite the challenging circumstances, some individuals are still eager to secure housing, leading to a steady demand for apartments. Despite these demands, the number of authorized apartments in Germany from January to August decreased significantly.
