German building permits rise 30%, but industry dismisses recovery claims

Building permits for apartments in Germany jumped 30% in July compared to a year earlier, prompting Federal Construction Minister Verena Hubertz to declare that “housing construction is picking up” and the industry is “regaining optimism.” But the rebound is cosmetic: it is driven by single-family homes, irrelevant to affordability in cities.

The July figure of 22,100 approved units represents growth from the lowest July level since 2009, according to the Federal Statistical Office. Between January and July, permits totalled 131,800 units, up 6.6% on the previous year — with single-family homes up 15% and multi-family dwellings up just 5.6%. Industry groups say this misses the point. “Housing construction is at a standstill — especially where the need is greatest,” said Aygül Özkan, CEO of the German Property Federation (ZIA). Axel Gedaschko, president of the GdW housing association, was blunter: “We are still a long way from a real turning point.”

The gap between permits and actual construction remains wide. The Ifo Institute forecasts just 205,000 completions in 2025, down nearly 20% from 2024 and well below France’s projected 300,000. Germany’s total housing stock grew by only 0.5% last year, while per capita living space continued its steady climb to 49.2 square metres — underscoring how limited supply fails to translate into urban affordability.

The policy response has focused on subsidies. The Bundestag’s 2025 budget allocates €7.4 billion to construction and housing, including higher social housing funding, while KfW promotional loans now offer rates as low as 0.01%. Hubertz has even floated more unconventional ideas, from housing above Lidl and Aldi supermarkets to terraced housing in Berlin and conversions of unused commercial space. But the Federal Institute for Research on Building (BBSR) has launched a review of subsidy programmes running until end-2026, delaying any major restructuring of support schemes.

Yet on the ground, major landlords remain unconvinced. LEG Immobilien, Germany’s second-largest listed housing company, has halted all new development. “We would need a higher return than in our existing business. We cannot achieve that under the current conditions,” said CEO Lars von Lackum. LEG’s portfolio delivers a 4.9% gross return — insufficient, management says, to justify new construction risks even with subsidy support. The contrast with Vonovia, which is proceeding with 3,000 new apartments, highlights how even the largest players diverge in their capital allocation strategies.

The industry’s demands are blunt. Associations want faster approvals, simpler standards, stronger funding for rental housing and tax relief. Gedaschko described the government’s proposed EH-55 subsidy for the construction backlog as “a step in the right direction” but insisted it must be “clearly defined, well-funded and sustained.” With the 2026 budget talks only beginning and the BBSR review stretching into late 2026, decisive change remains distant.

REFIRE: Permits may be rising, but Germany’s new-build sector remains economically uninvestable for its largest landlords.