In Germany, apartment building permits plummeted by 31.5% in July compared to the previous year, revealing a severe decline in demand within the construction and real estate industry. Factors contributing to this downturn include high building costs and difficulties in securing financing. Germany's goal of constructing 400,000 apartments annually is struggling to materialize. Low-interest rates had previously fuelled interest in German property, but rising rates led to a freeze in deals and falling prices. Industry leaders are urging government intervention, proposing measures like reducing property sales tax and expanding low-interest rate credit programs to support new residential construction.
The number of permits issued for building apartments in Germany dropped by a significant 31.5% in July compared to the same month last year, according to data released by the country's statistics office. This decline underscores a troubling trend of decreased demand in the construction and real estate industry. The industry is now calling for government support, and there's a scheduled meeting next week with Chancellor Olaf Scholz to address these concerns.
The statistics office has pointed to several key factors contributing to this drop in demand. High building costs are a major issue, making it more expensive to construct apartments. Additionally, securing financing for these projects has become increasingly challenging, adding stress to the broader sector.
To put the numbers in perspective, authorities granted permits for only 21,000 apartments in July, which is a staggering 9,600 fewer than the previous year. For the first seven months of this year, permits were down by 28%. Germany had set an ambitious target of building 400,000 apartments annually, but this goal has proven difficult to achieve.
For a while, low interest rates had driven a global interest in German property, considered safe and stable. However, a sudden increase in interest rates brought this boom to a halt, leading to financial troubles for many developers as deals stalled and property prices fell.
Tim-Oliver Mueller, the head of the German Construction Industry Federation, is advocating for urgent government intervention. His proposed measures include reducing property sales tax and expanding low-interest rate credit programs to support new residential construction. He expressed concern that if the government doesn't act decisively in the upcoming housing summit, the housing shortage in Germany will only worsen.
The decline in permits isn't limited to apartments. Single-family and two-family homes have also seen steep drops, with permits down by 37% and 53%, respectively, compared to the previous year during the first seven months of this year. These challenges highlight the urgency of finding solutions to revive the construction and real estate sector in Germany.
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