WIESBADEN (dpa-AFX) - Building permits in Germany rose sharply in the first quarter. In March, 21,800 apartments were approved in both new and existing buildings, an 11.5 percent increase compared to the same month last year, according to the Federal Statistical Office in Wiesbaden.
For the entire first quarter, 63,500 residential units were authorized in new and existing structures. This represents a 14.6 percent increase from the January-March 2025 period. Within new construction, permits saw particularly strong growth for two-family homes (up 23.2 percent) and apartments in multi-family buildings (up 14.9 percent).
While these figures offer a glimmer of hope in the struggle against housing shortages and rising rents, escalating interest rates and costs stemming from the Iran conflict threaten to stall the recovery.
Higher interest rates, rising inflation
'The number of new building permits issued in March shows that the German construction industry maintained robust momentum during the first month of the Iran conflict,' says Sebastian Dullien, Scientific Director of the Institute for Macroeconomics and Business Cycle Research at the Hans Böckler Foundation. However, the conflict is expected to significantly dampen the recovery.
Since the beginning of March, interest rates on 10-year mortgage loans have risen by 0.3 percentage points, making residential construction more expensive. Furthermore, increased inflation is taking its toll. 'When people have less purchasing power due to higher energy prices, there is less room for building a private home.' In the medium term, higher fuel and energy costs are also likely to drive up construction expenses. Even at current permit levels, not enough housing is being built to achieve a genuine easing of the housing market.
The Central Association of the German Construction Industry (ZDB) also warned against over-optimism. 'If we want to meet the country's demand, we would need at least 10,000 additional permits - per month,' said Managing Director Felix Pakleppa. With the Iran conflict, supply chains are becoming more fragile, financing costs remain high, and the geopolitical situation is unsettling developers and investors. 'A permit is not yet a groundbreaking, and certainly not a finished apartment.'
Residential construction in crisis
Building permits are a key indicator for residential construction, which has been mired in crisis due to elevated interest rates and construction costs: what is not approved today will not be built tomorrow. Affordable housing is particularly scarce in metropolitan areas. The federal government aims to accelerate residential construction through a 'construction turbo' via faster approvals and has reactivated subsidy programs for energy-efficient building./als/DP/stk
