The year 2023 saw a depressingly steady decline in the number of residential building permits issued
The year 2023 saw a depressingly steady decline in the number of residential building permits issued, as high construction costs and costly financing continued to dampen demand. However, the fall in October - the latest month for which figures are available - was at a slower rate than in the previous months, according to the Federal Statistics Office.
October saw approvals for 22,500 apartments, down 11.5% or 2,900 units less than the same month a year earlier. After the first ten months of 2023, only 218,000 new homes had been approved, almost a third less (26.7%) than over the corresponding period in 2022.
The figures include building permits for apartments in new buildings as well as conversions. New buildings accounted for a total of 179,800 dwellings from January to October, 29.8% less than in the same period in 2022. According to the figures, the last time fewer permits for new-build apartments were issued in the first ten months was in 2012 (176,600).
The figures show the sharpest declines in approvals for two-family homes with a drop of 50.5%, or 12,500 fewer units. The number of new single-family homes approved fell by 38.2% year-on-year (a fall of 25,500 homes) to 41,400.
The number of approved apartment units in multi-family houses also fell significantly, by more than a quarter (minus 25.2%), down 39,800 to 118,300 units. Only residential homes recorded a positive result with an increase to 7,900 newly built apartments (up 24 per cent or 1,500 units).
Dirk Wohltorf, President of the German Property Federation (IVD), emphasised how about a third of new construction costs are now accounted for by taxes and public charges. "Germany is now one of the highest-cost countries in terms of new residential construction. The federal, state and local governments must finally control their immeasurable hunger for tax revenues and put themselves on a diet," he said.
Dr. Andreas Mattner, president of industry umbrella lobby group German Property Federation (ZIA), said of the latest figures, "This continues a sad development that now threatens to become a permanent trend in Germany." Mattner said he's now expecting a shortfall of about 750,000 apartment units by 2025, with the figure possible rising to 830,000 units by 2027. His organisation is calling for a large-volume "KfW Housing Loan Programme" with a maximum interest rate of 2% for standard EH55 new builds along with a suspension of land transfer tax, including for build-to-lets. The costs of such a programme, said Mattner, would be about €9 billion. This sum would be compensated for by additional tax revenue from construction, and savings on transfer payments for unemployment, he said.
Germany has averaged the building of 405,000 new homes annually since it started collecting construction statistics in 1950. So the figure for completed homes in 2022 of 295,300 was about 27% below the long-term average. The figures for 2023 have not yet been fully compiled, but they will have been below those for 2022.
The peak year for building was 1973 when more than 714,000 apartment units were completed in the old West Germany. Following reunification, 1995 proved the high point with 603,000 new homes built, although the population at the time of 81.6 million inhabitants was lower than today's 84.6 million.
The worst year came in 2009, when only 159,000 homes were completed. Since then, new residential construction rose continuously to 306,400 completions in 2020. After a year-on-year decline of 4.2% to 293,400 new homes in 2021, the figure even rose slightly in 2022, by 0.6% to the 295,300 homes mentioned above.
Looking ahead, Germany's Ifo Institute has calculated that around 245,000 apartments will have been completed in new residential buildings in 2023, with likely just under 210,000 in 2024, and only around 175,000 in 2025. Adding in other completions from the conversion of existing buildings, only around 200,000 residential units would be completed in 2025.
REFIRE: There is no denying the scope of the challenges facing the housing construction sector, apart from the surge in construction costs and interest rates since 2020. Other factors, including ongoing debates on federal funding programs, budget cuts by the coalition government, bureaucratic hurdles, and evolving building regulations are contributing to the industry's struggles.
The demand for affordable housing is exacerbated by the steady upward rise in rents in many urban areas, despite still-falling property prices. Calls are growing louder for a fundamental shift in housing construction policies, advocating for improved subsidies, better amortization conditions, and simplified construction regulations to revive the industry. There is mounting fear of capacity reductions and job cuts, with severe implications for the housing construction industry, and by extension, social cohesion.