Building permits for apartments with the strongest slump since 2007

The crisis in German housing construction is intensifying: the number of building permits collapsed in March more sharply than at any time in 16 years due to higher interest and material costs. Only 24,500 apartments were approved, 29.6 percent or 10,300 fewer than a year earlier, the Federal Statistical Office announced on Wednesday.

The last time there was a stronger decline was in March 2007 with minus 46.5 percent. The number has thus been falling continuously since May 2022, and since October 2022 the minus has been more than 10 percent in each case.

"The decline in construction projects is likely to have continued to be mainly due to high costs for building materials and increasingly deteriorating financing conditions," the statisticians explained the downward trend. Due to the interest rate hikes by the European Central Bank (ECB) in the fight against high inflation, construction loans have become noticeably more expensive.

Significantly fewer apartment buildings approved

From January to March, a total of 68,700 permits for apartments were issued, which was 25.7 percent less than in the same period last year. The figures include commitments for apartments in new buildings as well as for new apartments in existing buildings.

The number of construction commitments for single-family homes slumped at an above-average rate in March, by 31.1 percent to 14,300. In the case of two-family houses, there was an even larger decline of 51.9 percent to 4100. "The number of approved apartments also decreased significantly in the case of the largest type of building, multi-family houses," the statisticians emphasized. Here there was a minus of 25.2 percent to 37,200.

According to industry estimates, at best 250,000 apartments are likely to be completed this year. Federal Building Minister Klara Geywitz (SPD) has already admitted that the traffic light coalition's new construction target of 400,000 apartments per year will also be missed in 2023.

In view of the misery, the real estate industry is insisting on more involvement from the public sector. The Central Real Estate Committee (ZIA) pleads for a loan program from the federal government with two percent interest. "If the housing yields are at two to three percent, but the lending rates at four percent, no one can build," said ZIA President Andreas Mattner. "That's why we have to radically change the framework conditions."