Fall in permits illustrate Germany’s continued residential construction downturn

Dark clouds are seen over the construction site of “4 Frankfurt” skyscraper in Frankfurt, Germany. (Image: Reuters/Kai Pfaffenbach/File Photo)

The 24% decline in permits in May, as compared to the same period a year earlier, highlighted a continued downturn in demand in the construction and real estate industry, according to a report by Reuters.

Around 17,800 permits were issued in May, the data showed. May’s 24% drop was steeper than the previous month’s 17% fall and making for a 44% drop over the past two years as Germany grapples with its worst property crisis in decades.

The figures follow data this week that construction is contracting further, with new building starts falling 26% in the first half of the year, coming on top of previous steep declines.

Last week, one of the nation’s biggest landlords, Vonovia CEO Rolf Buch, predicted that more property companies would go bust.

“Building permits in Germany continue to go in only one direction: down,” said Felix Pakleppa, head of the Central Association of the German Construction Industry.

“You don’t need a degree in statistics to realise that Germany is slipping into a deep housing crisis.”

For years, low interest rates and a strong economy sustained a boom across the German property sector, but that boom ended in 2022 when rampant inflation forced the European Central Bank to swiftly raise borrowing costs.