High costs and uncertainty in planning are causing problems for the construction industry: the number of permits for new residential construction fell in August more than it had in months. This is a major setback for the government, which wants to build 400,000 new homes every year.
The number of building permits for new apartments in Germany fell more sharply in August than it has in nine months. It fell by 9.4 percent compared to the same month last year to 28,180 apartments, as reported by the Federal Statistical Office. This is not only the fourth decline in a row, but also the strongest since November 2021. From January to August, the authorities gave the green light for the construction of a total of 244,605 ??apartments, which corresponds to a decrease of 3.0 percent or 7624.
“The continuing decline in the number of permits is an expression of the extreme uncertainty of public and private housing builders,” said Tim-Oliver Müller, Managing Director of the Main Association of the German Construction Industry (HDB). This is understandable and due to high cost increases. Politicians can counteract this with appropriate investment incentives that would also meet the high housing construction targets. “This is the only way to prevent the number of completions from falling further in 2023,” said Müller.
The IFO Institute had previously reported on a growing wave of cancellations in the industry: 16.7 percent of the companies surveyed were affected by project cancellations in September, after 11.6 percent in the previous month. “Due to the exploding material and energy prices and the rising financing interest, planning security is gone,” said IFO researcher Felix Leiss. “Construction costs keep rising. For some builders, all this is no longer feasible, they put projects on hold or completely pull the ripcord.”
A total of 211,636 apartments were approved for new residential buildings from January to August. That was 3.0 percent or 6622 fewer apartments than in the same period last year. The number of permits for single-family homes fell significantly by 15.8 percent. However, a year earlier the child benefit had increased the number of building permits here. According to the Wiesbaden statisticians, the funding contributed to the fact that in the period from January to March 2021 alone, almost 7,400 more single-family homes were approved than in the first three months of the current year.
In the case of two-family houses, the number of approved apartments fell by 2.8 percent to 21,176 units in the first eight months. In the case of multi-family houses, on the other hand, there was an increase of 5.2 percent to 130,746 apartments.
The negative development is another setback in the efforts of the federal government to build 400,000 apartments per year. Despite all the problems in construction caused by delivery difficulties, high energy prices and rising interest rates, the project should not be abandoned: “We are sticking to the goal, that has to be said explicitly,” said Federal Chancellor Olaf Scholz last week when presenting a package of measures from the so-called alliance for affordable housing. “We need more affordable housing,” said the SPD politician. This should succeed with around 190 measures, which the construction industry, trade unions, federal states, municipalities and other associations agreed on at the meeting.
The number of building permits is an important indicator of the housing shortage in many cities. However, approved apartments are often not built at first because craftsmen and construction companies do not have the capacity. Increased prices for building materials and building land are also slowing down.
