Real Estate and Society

Number of Condominium Planning Consents Takes Nosedive

10.

December 2020

The number of planning consents issued for condominiums in Germany has plummeted lately. Between January and September 2020, the construction of 5,992 condominiums was approved nationwide, which implies a decrease by 21.7 percent over prior-year period (source: destatis.de). But since demand for condominiums remains very high, it is reasonable to assume that the price trend for condominiums will keep pointing upward as available supply dries up.

There is also reason to worry about possible setbacks in housing construction. The work pace on construction sites in Germany has admittedly not slackened in the wake of the pandemic. Indeed, the building industry has been barely affected by the crisis so far, and even housing construction has continued to make progress – yet it could soon stall. According to the Handelsblatt business daily, a backlog of planning applications has built up in the relevant authorities (source: handelsblatt.com).  

Applications Backlogged in Building Authorities

More than half of the member companies of the BFW Federal Association of Independent Property and Housing Companies reported stalled processes. It appears that social distancing constraints have made building authorities less effective in processing applications, not least because the digitisation of the planning permit procedures has made virtually no progress.

The delay in planning approvals is creating the risk that contractors will not be able to move on to new projects once they have worked off their order book and completed their ongoing building projects. If this came to pass, housing construction would be slowed down drastically.  

Construction Backlog Growing

At the same time, many of the actually approved projects are either not moving forward or proceeding at a sluggish pace. The so-called construction backlog—connoting the number of flats that, while approved, have yet to be built—has in any case reached an all-time high, according to the Federal Statistical Office. By the end of 2019, the construction backlog amounted to 740,400 residential units, a level not seen since 1998 (source: haufe.de).

All things considered, it must be said that housing construction is making sluggish progress. The target set by the German Government in 2018 was to complete 375,000 flats per year through the end of 2021. But the year-end total last year was 293,000 only. The figure implies a year-on-year increase by only two percent. And the number of residential completions this year is unlikely to exceed the mark of 300,000 units by much.

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