German building permits, construction figures, head downwards

Germany has seen the number of building permits issued fall for the first time in ten years, while the construction industry is heading towards a dip towards the end of the year, according to statistics published by German official sources.

According to Claus Michelsen, industry expert at the German Institute for Economic Research (DIW)Germany's construction boom of the past few years is expected to taper out by 2019, with no major growth surge expected for the industry this year. “Developments have been rather weak since mid-2017. The signs are pointing to a slowdown, especially in new residential construction,” he said. While the sector will still grow in 2018, this is only because of rising real estate prices, he added.

His view is supported by the German Council of Economic Experts, the so-called Wise Men, which advises the government. These economists also forecast the construction industry nudging up against the buffers, with growth being hindered by capacity bottlenecks and an increasingly bemoaned shortage of skilled workers.

Of significance is also the decline in the number of building permits issued Germany-wide, with the number of permits falling by 7.3% to 348,100 in 2017, according to the Wiesbaden-based Federal Statistics Office (Destatis). The statisticians noted that the "numbers had risen continuously from 2008 until 2016", and attributed the trend reversal to lower demand for refugee housing projects in particular.

Building permits for single family homes and duplex houses fell by 5.0% (15,900 apartments less) and 2.7% respectively last year, while the number of permits for larger apartment buildings was "virtually unchanged." In the category of "hostels" which includes refugee accommodation, the number of permits collapsed by 41%.

The Federal Association of the German Construction Industry estimates that around 320,000 newly-built apartments in total will be completed in 2017. Although this figure marks a doubling compared to 2010, it still falls short of anticipated demand by 30,000 apartments.

The state-owned KfW banking group has further highlighted an overhang of 600,000 building permits in Germany which have yet to result in any actual construction.

The KfW pointed to a lack of capacity in the construction sector as one explanation for the phenomenon, but also warned that many investors in large cities were increasingly hoarding building permits to "speculate on rising rental costs and real estate prices."

Real estate industry lobbies were quick to comment on the falling level of permits issued. Dr. Andreas Mattner of the ZIA Zentraler Immobilien Ausschuss, the central lobby for the real estate and construction industries, commented: "The stagnation of issung permits particularly in the multi-family housing sector is a clear sign of moving in the wrong direction, and politicians need to take heed of this immediately. The newly-formed government is finally in a position to tackle this head-on." More land re-zoning for building, and a speedier approval of permit issuing, along with more incentives for builders to build were now urgently needed, he added.

According to Jürgen Michael Schick, president of broker association IVD, "When you consider that the number of buildings actually constructed always fall well short of the number of permits issued, then the extent of the gap becomes even clearer." If the govenrment doesn't address the problem immediately, then they are certain to fall short of their goal of 1.5m new housing units over this legislation period, he said.

Also adding to the chorus for swift government action was housing association BFW, whose president Andreas Ibel said, "The collapse in the number of permits issued gives cause for fear that living space is going to get even scarcer, and the queues of people lining up to view apartments will get even longer. We need action rather than words, across the whole political spectrum."