Expansion of building approvals limited exclusively to standalone residential properties - Extended construction approvals solely for standalone residences
In a recent press release, the Federal Statistical Office (Destatis) based in Wiesbaden, Germany, reported an increase in building permits for single-family homes during the first half of 2025. This rise in permits contrasts with a decrease in permits for two-family homes and a relatively stable number for multi-family homes.
The number of single-family home permits rose by 14.1% year-on-year to 21,300 units. In comparison, permits for multi-family homes, crucial for easing housing shortages, saw little change, with 57,300 apartments approved. The increase in permits for new two-family homes decreased by 8.3% to 6,000.
This shift in permit trends can be attributed to a rising demand for single-family homes amid a weak overall construction sector. The overall construction sector in Germany has been under severe strain since 2022 due to higher interest rates and soaring building material costs, limiting the ability to expand large multi-family projects.
The increase in single-family home permits may also reflect shifting preferences or easier permit approval for these projects compared to more complex multi-family buildings. However, it's important to note that despite the increase in permits, actual construction activity remains fragile. The average time between a building permit and completion in Germany has increased by 6 months to an average of 26 months since 2020.
Industry representatives attribute ongoing challenges partly to a lack of affordable and available building land, especially in metropolitan areas, hindering multi-family housing expansion which is critical to addressing the housing shortage. The number of completed apartments last year was 251,900, the lowest since 2015.
In a separate press release, Destatis reported that approximately 110,000 new apartments were granted by German authorities in the first half of the year, a 2.9% increase from the same period in 2010. This increase in apartment permits is the highest since 2010.
Overall, the modest rise in single-family home permits likely relates to market demand and regulatory or structural factors favoring simpler developments, while multi-family home permit levels remain constrained by costs, land availability, and sector difficulties.
[1] Destatis Press Release on Building Permits for the First Half of 2025 [2] Destatis Press Release on Completions for 2024
- The surge in single-family home permits might stimulate more vocational training programs for skilled laborers in the construction industry, as increased construction activity necessitates a larger workforce.
- With the rise in single-family home permits attributable to favorable conditions and regulatory factors, it could be an opportune time for investors to consider investing in real-estate finance, focusing on single-family home projects in the short-term. However, caution should be exercised due to the sector's ongoing challenges and a lag time between permits and actual project completion.
