Construction: Building permits at all-time low, cancellations in residential construction

The high demand for housing in Germany is not matched by a sufficient supply. New housing construction will not be able to provide any relief in the foreseeable future either. Sharp rises in construction prices and high mortgage interest rates have made housing unaffordable for many. As a result, people are cutting back on their housing aspirations. 

Anyone who currently needs a new apartment may have to rethink. Many prospective buyers can no longer afford real estate ownership under the new financing conditions. Instead, they are looking for an apartment to rent. As a result, the already high demand for rents in cities is rising further and entailing rent increases. 

Construction projects already under construction or still in the project phase are currently being delayed or even halted because they can no longer be financed. A survey by the ifo Institute shows that 14.3 percent of companies reported canceled orders in February, up from 13.6 percent in January. That's a disaster because new construction could ease the situation. "On average, order books are still well filled, but quite a few companies are already complaining about a lack of orders," says Ifo researcher Felix Leiss. 

The number of building permits fell to an all-time low at the beginning of 2023: 21,900 homes were approved in Germany in January 2023. According to the Federal Statistical Office, this was 26.0 percent or 7,700 fewer building permits than in the same month of the previous year. Over the past ten years, the number of building permits has risen continuously. In January 2010, it was still at 12,200 per month, peaked at 42,000 in December 2019, and then dropped to 21,900 thousand in January 2023. This development runs clearly counter to the targets of the German government, which originally aimed for 400,000 new homes per year. 

A new Difu study shows that municipalities are increasingly using urban planning instruments to counter the housing shortage. "This challenging task needs staying power (...) and, not least, innovative developers," comments Difu project manager Ricarda Pätzold. A quick solution is probably not in sight at the moment.

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