Last year more new apartments were built in Germany than experts predicted. A sign that the feared break-in doesn’t actually happen? No – because this one is just around the corner.
Despite a better-than-feared balance last year, economists and the construction industry believe that German housing construction is still facing a real downturn. According to figures from the Federal Statistical Office, 294,400 apartments were completed in 2023, as reported by the Wiesbaden authority. That was only 0.3 percent less than in 2022, and therefore significantly more than many experts expected.
However, the federal government’s original goal of 400,000 new apartments was missed – as has been the case every year. “The bottom line is that last year, too, fewer apartments were built than the need for affordable housing actually requires,” said Tim-Oliver Müller, the managing director of the Federal Association of the German Construction Industry.
Private house construction is declining
Building has become much more expensive in the past two years due to the simultaneous increase in loan interest rates and construction costs. The Federal Office’s figures indicate that the double price shock primarily affects those who can no longer afford the dream of owning their own house:
The number of new single-family homes fell by more than 9 percent to 69,900. In multi-family homes, which are usually built by housing companies or investors, 156,300 new apartments were built, 4.1 percent more than in the previous year.
Minister spreads confidence
Federal Construction Minister Klara Geywitz (SPD) wants to counter the bad mood in the construction industry with a positive message: “The construction completion figures for 2023 show very clearly: The situation in the construction industry is stable,” she said.
However, neither economists nor companies share this assessment. After all, it is not the completed apartments that are decisive for the future – there the construction workers move out and the residents move in. “The construction completion figures published today are no reason to sugarcoat anything,” said Axel Gedaschko, the president of the leading association of the housing industry GdW.
Rather, the main indicators for future developments are housing permits and construction contracts. The number of new permits fell by more than a quarter to 260,100 apartments in 2023 – the lowest level since 2012. And there had already been a sharp decline in 2022.
The real collapse in construction is yet to come
Anything that is not approved will not be built – apart from a few illegal buildings. According to the Federal Statistical Office, it usually takes two years until a permit actually becomes an apartment or house. This means that the shrunken number of residential building permits in 2022 and 2023 will only have a full impact on construction activity this year.
As far as construction orders are concerned, the absolute number is unknown. However, in economic surveys conducted by economic research institutes, many construction companies complain about a lack of orders – no sign that the situation is stable.
Especially in the area of residential construction, many developers and housing companies have postponed their plans or shelved them entirely. The main association of the construction industry expects around 250,000 new apartments to be built this year.
Bad news for tenants
The Munich-based Ifo Institute is even more pessimistic than the Construction Industry Association. Its construction and real estate expert Ludwig Dorffmeister expects 215,000 new apartments this year, 120,000 of which will be in multi-family houses including dormitories.
“The current approval numbers are clearly pointing downwards, so there will be fewer and fewer new projects in the next few years,” said Dorffmeister. “The decline in completion figures is a given for now, even if the exact course remains uncertain.”
Since the housing shortage in cities will worsen with a housing construction slowdown, many experts expect rents to continue rising, even though property prices have also fallen.
And since it takes time in Germany for the permit to become a building, even an increase in the number of permits would not lead to a rapid improvement in construction, says the economist.
“Conversely, due to the long implementation times, a possible medium-term increase in approvals means that the turnaround in completions will only become visible with a delay.”
Source: Stern
