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New Construction Slower than Expected

In 2017, a total of 284,800 flats were completed in Germany. This implies an increase by 2.6 percent over prior year and is the highest level since 2002, as the Federal Statistical Office reported.1 Nevertheless, the number of new flats coming on-stream falls well short of actual demand and of the annual target set by the Federal Government. The stated goal of the governing Grand Coalition is to ensure an annual completion rate of 375,000 new flats between now and 2021.

What is more, the construction figures are lower than expected. Real estate industry insiders had anticipated a completions figure beyond the mark of 300,000 by the end of 2017. Accordingly, real estate expert Michael Voigtländer of the IW German Economic Institute in Cologne called the annual statistics a “disappointment.” Peter Hübner, President of the HDB German Construction Industry Federation, believes the construction total may go as high as 340,000 flats in 2018. But even if this figure was achieved, it would still undercut the annual requirements identified by the Federal Government.2

Number of Planning Permission Declining

The problem is compounded by the fact that the number of planning permissions dropped by 7.3 percent year on year in 2017.3 During the first quarter of 2018, the Federal Statistical Office registered a further decline in planning permissions. Specifically, the number of approved flats dropped by 1.7 percent compared to the first three months of the previous year.4 Andreas Ibel, President of the BFW Federal Association of Independent Property and Housing Companies, expects that the number of completions will also decrease in the medium term. This makes the stated goal of the Federal Government to ensure the completion of 1.5 million new flats by the end of 2021 look even more remote.

The lack of zoned land is cited as one of the main reasons why the residential accommodation created is insufficient despite strong demand. At the same time, the severe constrains and slow planning permit procedures are criticised by insiders of the real estate industry. The body politic has lately responded to these appeals from the business community. The governing Grand Coalition announced a housing summit where government representatives of the federal, state and municipal levels will sit down with representatives of the real estate industry and tenant interest groups to work out efficient solutions for getting housing construction up to speed.

In Hesse, the state parliament just agreed to reform the building code. The draft bill intends to make it easier to convert vacant office accommodation into flats, among other measures. Moreover, planning permit procedures are to be improved by simplifying the formal requirements.5