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More Planning Permits in German Housing Construction

According to the Federal Statistical Office (Destatis), a total of 182,800 permits for the development of new flats were approved in Germany during the first half of 2016. This equals a year-on-year increase by 30.4 percent. In absolute figures, planning permits increased by around 42,700. Out of this total number of flats approved during the first six months of 2016, multi-family dwellings accounted for 18,900 units (an increase by 30.7 percent). But the number of flats in semi-detached houses went up as well, jumping up by 18.3 percent or 1,800 flats. The number of permits for flats created not through construction of new housing but by converting or further developing existing buildings also climbed to a new peak of 25,800 flats. It is a level not seen since 1998, when completions added up to 27,600.

Housing Construction Heading in the Right Direction but still Short of Demand

A recent survey conducted by the LBS state building and loan associations identified the primary reasons for the renewed interest in housing construction in Germany as the stepped-up demand for housing in the metro areas, as the persistently low interest rate level, and as the lack of investment alternatives. Citing the official building-activity statistics it had evaluated, the survey observed that multi-family residential construction accounts for the bulk of development activity. According to the LBS researchers, the trend in housing completions is therefore pointing in the right direction. Then again, completions continue to fall short of the mark. Experts estimate that somewhere between 350,000 and 400,000 flats would have to be completed between now and 2020 to cover demand in Germany.

Building Land Prices Going up in Berlin and Brandenburg

Meanwhile, massive demand is making plots zoned as building land scarce and pricey in Berlin. This contrasts with the situation in Brandenburg, where the number of building plots sold soared last year, driving the average square-metre price up to a new all-time high. According to figures released by the state statistics office, the number of sales in Berlin actually declined last year, but the realised market values far exceeded those of previous years. A total of 1,074 undeveloped plots changed hands in the German capital, which implies a year-on-year decline by 76 plots. The average market value per square metre equalled 424 euros (a 40-percent increase). By far the most expensive inner-city borough in Berlin is Mitte. Here, the average square-metre price in 2015 was 2,264 euros. The lowest number of sales transactions were registered in the boroughs Friedrichshain-Kreuzberg (20) and Charlottenburg-Wilmersdorf (23). As it so happens, they are also the most expensive boroughs after Mitte with square-metre prices of 1,784 euros and 1,375 euros, respectively. In Brandenburg, prices for building land reached their highest level since 1991 in 2015. The average rate paid per square metre was approximately 57 euros. This implies an increase by well over 16 percent since 2014. Overall, the number of sales transactions increased by 850 year on year, up to 7,484. That being said, proximity to metropolitan Berlin is the defining factor for prices and the number of building sites sold. It also explains why the highest number of sales was recorded in the County of Teltow-Fläming which straddles Berlin's southern city limits. The most expensive plots in Brandenburg are found in Potsdam, which is not only the state's capital and largest city, but also lies just outside Berlin.