Housing Approvals Hit Lowest Level Since 2010 in Germany

The number of new housing approvals in Germany has reached its lowest point since 2010, with only 215,900 units authorized in the previous year. This represents a significant decline of 43,700 approvals, or 16.8%, compared to the previous year, according to data from the Federal Statistical Office.

The ongoing shortage of housing remains a pressing issue in urban areas across Germany. Industry representatives have repeatedly called for more effective subsidies and streamlined building regulations to tackle this widespread problem.

The Federal Ministry of Building, led by the SPD, has indicated signs of a potential turnaround in the current year. Increased funding for social housing is expected to stabilize the construction sector, with approximately 40% of the newly approved units receiving public support.

Despite the reduction in approvals, the number of housing units currently under construction remains substantial. The Federal Statistical Office noted that the decline in approvals slowed in the second half of the previous year. Importantly, the number of approvals does not directly correlate with the number of completed units, which has held steady at around 300,000 annually in recent years. The gap between approvals and completions is attributed to delays and a backlog of previously approved projects, which numbered nearly 827,000 at the end of 2023. Currently, about 390,000 housing units are under construction, according to the government.

It appears that the government's goal of achieving 400,000 new housing units in 2024 will not be met. Projections indicate a decrease to around 265,000 completed units, while the Central Association of the German Construction Industry estimates an even lower figure of up to 40,000 fewer units.

Rising interest rates for mortgage loans and increasing construction costs have posed challenges for both individual builders and companies. However, the European Central Bank has shifted its policy, leading to a reduction in credit costs, with mortgage rates for long-term loans dropping by 0.2 percentage points at the end of the previous year compared to the beginning.

Leading industry organizations emphasize the urgency of addressing the housing shortage. The Federal Association of Independent Real Estate and Housing Companies has pointed out that the country continues to lack hundreds of thousands of housing units. They argue that bureaucratic hurdles and complex approval processes hinder construction efforts, urging the new government to prioritize housing development as a critical issue.

Similarly, the Association of German Housing and Real Estate Companies has highlighted the growing scarcity of affordable housing and its severe implications for social cohesion in Germany. The association's president has called for the next government to make housing construction a top priority to ensure the social stability of the nation.

To expedite construction, industry leaders have suggested implementing simplified and uniform building standards, streamlining state building codes, and easing energy regulations. They also advocate for increased government funding to address the investment backlog in the construction sector, emphasizing that saving on budget allocations would exacerbate the existing challenges.