No end to steep fall in issuance of German building permits

There is no respite to the downward trend in the number of building permits being issued in Germany, with January and February seeing the total of permits issued at 28,200 for new-build houses and apartments. That is 9,300 or a quarter fewer than in the same period, figures released by Germany's Federal Statistics Office (Destatis) show.

The results include both building permits for apartments in new buildings and for new apartments in existing buildings. The most significant drop, at 35%, was for single-family homes, with 2-family homes down 15%. There were 21.5% fewer building permits issue for multi-family houses.

Lobby group the German Property Federation (ZIA) uses as its working figures a new construction gap of 600,000 apartments. On current projections, that figure will increase to around 830,000 apartments by 2027, it says. As early as 2025 it expects there to be a shortfall of 720,000 apartments. The number of permits issued throughout the whole of 2023 fell to its lowest level in more than 10 years, despite the strong demand for housing in many parts of the country.

Little immediate prospect of improvement

There is no immediate prospect of improvement, with nearly one in five companies currently being negatively affected by cancelled orders, according to the Munich based Ifo Institute in its quarterly survey. The Institute's Klaus Wohlrabe commented: "The situation in residential construction remains tense. In addition to cancellations, there are too few new orders." Aside from cancellations, 56.2% of companies complained about a lack of new orders.

The ZIA's president, Dr. Andreas Mattner, has long been warning of pending disaster in residential construction. Among the industry's most pressing demands is for a reduction by the federal states of the real estate transfer tax, the Grunderwerbsteuer. This is levied on the purchase of property or land by each individual states, at rates ranging from 3.5% in Bavaria to 6.5% in Brandenburg, North Rhine-Westphalia, Saarland, Schleswig-Holstein and Thuringia.

This revenue itself has been falling dramatically with the downturn nationwide in property transactions. Figures from Destatis show that the states collected only €6.3bn from the tax in the first six months of 2023 - a drop of 33.5% compared to the high of about €9.5bn in the same period in 2022. It is now at its lowest level in more than six years.