In 2023, housing completions in Germany will decrease by 16.9%. Building permits will decrease by 32.0% due to rising interest rates and high inflation, making recovery in 2024 impossible. However, as the current Geomarketing study “Residential Construction” by InterConnection shows, regional differences in Germany are significant, and there are also some bright spots.

The total number of completed apartments in Germany in 2022 was 258,794, as shown by Interconnection’s regional study analyzing housing construction at the district level. This number will decrease to around 215,069 in 2023. Overall, the four federal states with the highest housing construction volume, namely Bavaria, North Rhine-Westphalia, Baden-Württemberg, and Lower Saxony, will experience a decline in the construction market of 18.4%, which is above the German average. Only in the federal states of Brandenburg and Thuringia will more apartments be completed in 2023 than the previous year (+7.1% and +4.7%, respectively). However, these increases suggest more of a delay in the implementation of construction projects rather than a dynamic development of the construction sector. In Brandenburg, for example, more than 30% of building permits issued from 2018-2022 were not implemented and are now being brought to life. The positive trend in Thuringia is only a brief glimmer: Thuringia will experience the strongest decline in the number of building permits in 2023, exceeding 50%. Many apartments remain vacant in this sparsely populated area, with a focus on renovating and converting existing housing in Thuringia’s residential construction sector.

Winners and Losers

The district with the highest growth in housing construction at the district level, with 511.4%, is Ansbach. The explanation is simple: 2022 was the least productive year in the execution of residential construction projects from 2018-2022; only 6% of the planned construction projects for the year were realized. Thus, 2023 became a year of seemingly unparalleled growth for the independent city of Ansbach. There is a similar reason for the increase in housing completions in the other two “top performers” (see chart), albeit from Lower Saxony and Hesse. Behind many presumed growth islands are delayed construction projects that were quickly realized due to rising costs. Regensburg, which was particularly successful in completing construction projects from 2020 to 2022, found itself at the top of the decline in the number of completed housing units by 64.6% in the crisis year 2023. The realization rate of approved residential buildings in Regensburg in 2023 is hardly improvable at 99%. The same applies to Coburg, which also clearly reflected the situation in the state’s housing construction in 2023. The next top performer in the construction decline, Oldenburg, had an unprecedented completion rate of 94% in 2022 and returned to its average values in 2023 with a completion rate decline of 63.7%.

Multistory Residential Construction on the Rise

A clear trend toward multistory construction is evident in Germany. In 2023, 63.6% of all completions will be in multistory residential construction. Berlin, Hamburg, Bremen, Hesse, Baden-Württemberg, and North Rhine-Westphalia have a higher rate of multistory residential construction in 2023 than the overall German average. These six federal states also account for 53% of all completions of multifamily houses. The construction of 20% of all multistory residential buildings is concentrated in five major cities in Germany, namely Berlin, Hamburg, Munich, Frankfurt am Main, and Hanover. This amounts to 27,477 housing units. Berlin also leads in the number of completed single and two-family houses.

Prefabricated Houses are Particularly Popular in the Southwest

28% of all completed housing units in Germany are single and two-family houses. Bavaria dominates with over 5,600 units, followed by Baden-Württemberg with over 4,800 units. Prefabricated houses play a significant role in this segment. Approximately 60% of constructed prefabricated houses are in Baden-Württemberg, Rhineland-Palatinate, Saarland, and Bavaria. The prefabricated house rate in this region is over 40%, well above the German average.

2024 without Growth

2024 will bring another decline in residential construction in Germany of 23.4%, and recovery is only expected in 2025. However, it is certain that there will be strong regional differences with growth islands even in 2024.

18/01/2024

Copyright: Interconnection, Publication free of charge for coverage regarding the study and InterConnection Consulting.