German residential building permits fall in IH 2017

Residential building permits issued in Germany fell by 7.3% in the first six months, in a sign that the construction sector is heading for a slowdown in the second half of 2017.

German authorities issued 13,400 fewer residential building permits in the first half of the year compared with the first six months of 2016, according to data released this month by the Bundesamt (Federal Statistics Office). Permits were issued for almost 150,000 new homes and construction work was approved for more than 20,000 existing buildings, according to the Bundesamt.

Interestingly, despite increased state spending on transport infrastructure and social housing, partly to accommodate more than a million refugees in the past two years, approvals for ‘hostel residences’, which includes shelters for refugees, fell by 32% to 8,461.

There was some good news, though: the number of approvals for apartments bucked the trend to rise by 2% to over 82,000, the highest figure recorded in the first half in 20 years, the Bundesamt said. Last year already marked a 17-year high for residential building permits, with 375,400 issues, a rise y-o-y of 20%.

Increasing construction costs are a big factor in the drop in permits, according to BFW president Andreas Ibel. This is because the Energy Saving Regulation (EnEV 2016), which came into force on 1 January 2016, stipulates that in new construction projects after that date, the energy values of the overall building must be reduced by 25%. ‘This has pushed up the cost of construction by 7%,’ he said.

Another factor is Germany’s political framework regarding new builds, according to Ibel. BFW members account for around 50% of new builds in Germany. ‘When surveyed, almost 60% of respondents said that the political framework for new construction has worsened in recent years,’ Ibel said. ‘The reasons they gave include: administrative hurdles, the increased cost of legal documentation as well as a lack of development sites.’

Others have also been quick to criticize the fall in permits issued. Dr. Andreas Mattner, president of ZIA, called them ‘disillusioning’. ‘To be clear: the sector is over-regulated, construction costs are too high and the permit approval process is too protracted,’ he said.

Nonetheless, financing conditions and low interest rates are helping to support investment in essential housing, BFW members conceded.

But it not enough, Ibel warns. ‘Without the necessary stimuli to improve the political framework, a long-term upswing in both the number of building permits and construction figures cannot be expected. For a turnaround to happen, the federal government, German states and local authorities will need to implement a whole raft of measures. Development sites shouldn’t be sold to the highest bidder but, rather, to the group with the best quality concept for the site, in accordance with country-wide criteria, so that small investors aren’t discriminated against. Also, planning and approval procedures urgently need to be simplified and sped up.’