Building permits at lowest level since 2010

The German real estate market remains in a deep crisis, as the latest figures on building permits show. Last year, their number fell by 17% - the third decline in a row.

According to the Federal Statistical Office, the authorities only approved 215,900 apartments in 2024, which corresponds to a drop of 43,700 units or 16.8 percent compared to the previous year. The number of building permits thus reached its lowest level since 2010.

Although the decline slowed in the second half of 2024, the contradiction remains obvious: "This development stands in stark contrast to the ongoing housing shortage in major cities," emphasizes Cyrus de la Rubia, Chief Economist at HCOB Bank. He was surprised that the issue received little attention during the election campaign.

According to de la Rubia, relying solely on interest rate cuts by the European Central Bank to stimulate the market is not enough. In addition to high material costs and strict building standards, bureaucratic hurdles - such as 16 different building regulations in the federal states - are a major obstacle to more construction activity.

Significant decline in single-family homes

In 2024, a total of 172,100 new-build apartments were approved - a decrease of 19.4% compared to 2023. The statistics also include approvals for apartments in existing buildings.

The construction of single-family homes was particularly hard hit: According to the Federal Statistical Office, the number of building permits in this area fell by 20.3 percent to 37,900. There was also a significant drop of 11.3 percent for two-family homes, meaning that only 12,700 apartments were approved.

Nevertheless, the majority of new apartments are still being built in apartment buildings. Around two thirds of the apartments approved in 2024 will be in this sector. Here, 114,200 permits were issued - 19.7% less than in the previous year.

No easing in sight

A recovery in residential construction is still a long time coming. "It will be some time before the sector regains real momentum," predicts economist Cyrus de la Rubia.

The so-called real estate experts also painted a gloomy picture in their spring report. According to their calculations, the number of building permits is likely to be just 210,000 this year - a dramatic drop of 45% compared to 2023.

The low number of permits also has an impact on actual residential construction: According to the report, only 230,000 new homes are expected to be built. This means that construction output will fall far short of the German government's target of 400,000 units.

"We now have to go through a valley of tears," explained Ralph Henger from the German Economic Institute (IW) last week at the presentation of the ZIA industry association's report. The gap between the actual construction volume and what would be necessary for an adequate supply of housing is enormous - and will become even more noticeable in the coming years.