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Germany’s housing crisis shows no sign of easing, decline in building permits

 Germany’s housing crisis has shown no sign of easing, with a 23.5-percent decline in the number of residential building permits issued in January compared to the same period of 2023, the Federal Statistical Office (Destatis) said this week.

Only 16,800 apartments were granted building permits in January, according to Destatis. Last year, a total of 260,100 building permits were issued for apartments, the lowest level since 2012.

“The new year has started with further bad news for residential construction,” Felix Pakleppa, chief executive of the German Construction Federation (ZDB), said in a statement, warning that “today’s lack of building permits is tomorrow’s lack of orders and apartments.”

Pakleppa told Xinhua that it was “difficult to say when the situation will ease again.” For the current year, 235,000 housing completions were expected. “Falling interest rates and a reliable funding environment are crucial for more construction to take place again.”

After peaking at more than 4 percent, interest rates for 10-year building loans have stabilized at around 3.5 percent, according to mortgage broker Interhyp. This is still significantly above the rates in the decade before inflation started skyrocketing as a result of the Russia-Ukraine conflict.

The German government has failed to meet its annual target of 400,000 apartments since 2021. In view of the economic recession, construction minister Klara Geywitz said it is important to “get back on track” instead of reducing capacity.

Meanwhile, the mood in residential construction has hit a historic low as cancellations are increasing, according to the ifo Institute for Economic Research. “At present there isn’t a single ray of hope on the horizon for residential construction,” ifo expert Klaus Wohlrabe said last week.

Calculations by the German Property Federation (ZIA) show a shortage of 600,000 apartments in Europe’s largest economy this year. The gap is set to grow to 830,000 by 2027.

“The situation on the housing market is getting worse … the slump in residential construction is more than worrying,” Lukas Siebenkotten, president of the German tenants’ association (DMB), said at the end of February, warning that more tenants were facing existential challenges.

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