Building permits at an all-time low: German real estate sector remains in crisis

Building permits at an all-time low: German real estate sector remains in crisis

The German real estate market remains in crisis, as the latest figures on building permits show. In 2024, 17 percent fewer permits were issued than in the previous year - the third decline in a row.

According to the Federal Statistical Office, the number of approved apartments fell to 215,900, a drop of 43,700 units or 16.8 percent compared to 2023. This meant that the number of building permits fell to its lowest level since 2010.

Although the decline slowed in the second half of the year, the contradiction remains obvious: "This development is in stark contrast to the housing shortage in major German cities," explains Cyrus de la Rubia, Chief Economist at HCOB Bank. He expressed his surprise that the issue hardly received any attention during the election campaign.

De la Rubia also warns against relying solely on interest rate cuts by the European Central Bank as a solution. High material costs, strict building standards and, in particular, bureaucratic hurdles - including 16 different building regulations in the federal states - are making construction activities considerably more difficult.

Single-family homes

In 2024, a total of 172,100 new homes were approved, a decrease of 19.4 percent compared to the previous year. The statistics also include conversions and permits for existing buildings.

The construction of single-family homes was particularly affected: Here, the number of permits fell by 20.3 percent to just 37,900. The number of units approved for two-family homes also fell by 11.3 percent to 12,700.

Despite the general decline, most new-build apartments continue to be constructed in apartment buildings. In this sector, 114,200 apartments were approved - 19.7 percent fewer than in 2023.

No recovery in sight

A recovery in residential construction remains elusive. "It will be a while before the market regains momentum," predicts economist Cyrus de la Rubia.

The spring report by the "real estate experts" also paints a gloomy picture. According to the report, the number of building permits could fall to just 210,000 in 2025 - a drop of 45% compared to 2023.

The low number of permits will also have an impact on actual construction output: Experts predict that only 230,000 apartments will be completed in 2025. This means that residential construction will fall far short of the German government's target of 400,000 units.

"We are facing a deep crisis," emphasizes Ralph Henger from the German Economic Institute (IW). The gap between the real construction volume and what would be necessary to provide sufficient housing is enormous - and will continue to widen in the coming years.

Source: Tagesschau, 18.02.2025