Residential construction permits in Germany up 8.4% in January

The number of building permits issued in Germany was up by 8.4% year-on-year in January, official figures showed on Wednesday, a sign of progress as the country faces a housing shortage and soaring rents.

Authorities gave the green light for the construction of 16,000 new flats, up 6% or 900 units compared to the same month last year, according to the Federal Statistical Office.

The number of permits issued for single-family houses surged by 12.6%, while semi-detached houses saw a 26.1% increase.

Approvals for the construction of new multi-family homes, which are the most common type of housing, climbed by around 7% – a sign that investors are venturing back into the market.

The figures show that the construction industry has started the new year with a tailwind, said Sebastian Dullien, research director at the Macroeconomic Policy Institute of the Hans Böckler Foundation. However, the trend has since slowed a little, he added.

The Iran war is also bringing risks to the construction market, the expert noted.

If purchasing power is reduced due to rising energy prices, people are less likely to build a home, Dullien said, adding that rising inflation could also lead to higher construction interest rates.

The level of building permits is a key indicator of the state of the residential construction sector, which has been struggling due to rising interest rates and construction costs.

Affordable housing is in short supply in Germany, particularly in urban areas. The government has plans to boost residential construction including by enabling faster authorization of permits, alongside billions in state debt to be spent on infrastructure investments.