Construction in Germany is declining sharply, pushing the government’s goal of building 400,000 new apartments per year further out of reach. A reversal in this trend for the second half of the year appears unlikely.
:max_bytes(150000):strip_icc()/GettyImages-976201130-031950ddf887496fb9da13ce9d2dd8e5.jpg "German housing construction plunges, 400,000 annual goal slips away")
Building permits for new apartments plummeted in the first half of the year. From January to June, permits fell by 21.1 percent compared to the same period last year, a decrease of 28,500 to 106,700, according to the Federal Statistical Office on Friday, August 16. The downward trend persisted through to June, which saw a drop of 19.0 percent to 17,600 apartments. Compared to June 2022, this represents a 42.1 percent decrease. High financing and construction costs are cited as reasons for the decline, with industry associations also complaining about excessive bureaucracy.
“The current level of building permits corresponds to just over 200,000 newly constructed apartments per year,” said Sebastian Dullien, scientific director at the Institute for Macroeconomics and Economic Research (IMK). “This means that the German housing market will continue to struggle.” The government’s target remains 400,000 units per year.
The decline in building permits for new single-family homes was the steepest in the first six months of the year, with a drop of 30.9 percent to 18,600. For two-family homes, the decrease was 14.9 percent to 6,600. Permits for multi-family buildings—the most common type—also saw a significant reduction, falling by 20.8 percent to 57,300 apartments.
The prospects for a turnaround in the second half of the year are not promising. In July, more than half of construction companies reported a lack of orders in residential construction, according to a recent survey by the Munich-based Ifo Institute. Overall, 51.3 percent reported a shortfall, up from 50.2 percent in June. Klaus Wohlrabe, head of Ifo surveys, commented, “What is not commissioned today cannot be built tomorrow. This is also reflected in the forecasts for the number of new residential buildings.”
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