Dropping Construction Numbers in Germany Persist
The construction sector in Germany seems to be going through a rough patch. September saw approvals for 19,300 apartments, a 29.7% decrease compared to the same period the previous year. In the first nine months of 2021, this decline translated into a 28.3% year-on-year drop, amounting to 76,900 fewer apartments.
The stats include permits for new buildings as well as renovations. Notably, there were significant drops in all types of constructions except for single-family homes. Two-family houses suffered the most significant decrease, with the number of approved permits more than halving. Due to missing September data from Lower Saxony, these numbers were estimated.
Experts attribute this continuous slump to increased construction costs and strained financing conditions.
The sharpest drop was noticed in the construction of two-family houses, with a more than 50% decrease in permits from the previous year. Various elements contribute to this downward trend in building permits in Germany, including:
- Weakened residential construction sector: The construction industry in Germany is projected to shrink by 5.8% in real terms in 2024, predominantly due to the sluggish residential construction sector.
- Labor shortages: Persistent labor shortages in the German construction industry have played a significant role in this decline.
- Increased insolvencies: The overall number of companies applying for insolvency proceedings increased by 24.9% in the first half of 2024, suggesting financial troubles in the sector.
- Worsening financing conditions: High interest rates have made it costlier for builders to secure funding, further cutting down on building permits.
- Skyrocketing construction material costs: Rising construction material costs have put a financial strain on developers, escalating their expenses for building new units.
- Missed targets: Residential construction targets are expected to be missed by a significant margin, making it challenging for new projects to commence, due to the falling approval figures.
These factors have collectively contributed to the decline in building permits for apartments and two-family houses in Germany, leading to fewer new residential units being constructed.
Sources:
