Bavaria Sees Uptick in Apartment Approvals thanks to New Policies and Market Changes
Additional apartment complexes given the green light in Bavaria - Housing provisions expanded in Bavaria
It's about time! After a string of rejections, the number of approved apartments in Bavaria has surged by almost 10 percent in Q1, reaching 13,666 units, as per the State Office of Statistics. After a steep drop—with 21,493 approvals in Q1 of last year—things are finally looking up. The sluggish growth could be due to the fact that construction costs, as stated by the Federal Statistical Office, haven't been escalating as rapidly as they did post Ukraine war.
Key drivers of the growth in Bavaria were single-family homes in rural areas. Surprisingly, approvals in major cities dipped by nearly a third, while they soared by a quarter in rural districts. This aligns with the trend seen in individual government districts: Upper Bavaria, Swabia, and Middle Franconia recorded declining numbers—these being the state's three largest cities.
On the flip side, some government districts witnessed significant growth. In Upper Franconia, the approved apartments almost doubled to 949—starting from a fairly low base. Absolutely speaking, the biggest surge was observed in Lower Bavaria, with an increase of 705 approvals to 1,757.
The uptick can be credited to a few recent policy and market changes aimed at addressing Germany's housing crunch and expediting construction.
- Faster housing construction initiative: The new German coalition government has proposed a draft law within its first 100 days to boost apartment building across the nation. This includes merging subsidy programs for smoother financial backing and simplifying construction legislation, particularly making municipal approvals smoother and speedier. For instance, the planning approval process, which was slammed for taking longer than the actual construction, has become easier for municipalities, accelerating project approvals in regions like Bavaria[2].
- Simplified construction regulations: Simplification of building codes encourages quicker construction. Certain energy-efficiency and fire protection requirements have been relaxed, making it easier and less expensive to secure new building approvals and construction, which likely contributed to the increase in approvals[2].
- Supply response to housing shortage and escalating rents: Germany grapples with a substantial housing deficit, with studies indicating a shortage of around 550,000 homes nationally and a need to construct 100,000 social housing units annually to cater to demand. The government’s effort to increase housing supply, including social housing, serves to counterbalance rising rents and dwindling affordable housing options in Bavaria, incentivizing increased approvals to combat supply constraints[1][2].
- Market dynamics and pricing: Property prices in Bavaria, with an average of €4,038 per square meter, remain high but are lower than in some other German states like Berlin. The relative affordability, combined with government incentives, encourages developers to seek approvals for new apartments to fulfill demand and capitalize on rising prices[3].
In short, the recent growth in apartment approvals in Bavaria after prior drops is primarily due to the new federal government’s initiatives to expedite housing construction through legal simplifications and financial consolidation, coupled with a nationwide push to alleviate the housing shortage and make new developments feasible and timely[1][2][3].
Single family homes in rural areas have seen a surge in approvals, aligning with the overall growth in Bavaria's housing market. This increase can be attributed to recent policy changes aimed at streamlining construction processes and addressing Germany's housing crunch, making it an attractive opportunity for finance and investing in single family homes and real-estate.
With the sluggish growth in construction costs and simplified building regulations, securing building permits for single family homes may offer lucrative opportunities for those looking to invest in the housing market. The potential for profit, coupled with the government's focus on alleviating the housing shortage, presents an enticing prospect for investors involved in the construction and development of single family dwellings.
