New building in Germany at historic low
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Housing shortages are met with fewer and fewer building permits: Germany is facing an enormous challenge with regard to the housing market due to the sluggish new construction. The gap between supply and demand has been widening for years. But the latest figures on new construction in Germany should motivate apartment seekers — and real estate investors — to take action.
New building almost at a 15-year low
The German real estate market has been in deep crisis for years. This is shown by the number of building permits in recent years, which according to Destatis 2024 saw the third decline in a row. For example, the number of building permits fell to 216,000 last year - this corresponds to a minus of 17 percent compared to the previous year and the Lowest level since 2010. In the pure new building (i.e. excluding new apartments in existing buildings), 172,100 apartments were approved, which even represents a minus of 19.4 percent compared to 2023.
However, there are major discrepancies with regard to the types of new buildings: According to the statistics office, building permits for single-family homes fell by 20.3 percent to 37,900. Two-family houses declined by 11.3 percent to 12,700 apartments and the number of building permits for apartment buildings fell by 19.7 percent in 2024 compared to 2023.
The main brakes on construction activity are rising material costs, high standards, too much bureaucracy, political omissions and higher interest rates in recent years. The resulting massive decline in new construction stands in stark contrast to the housing shortage, which prevails particularly in major German cities and popular areas.
Housing market crisis worsens
According to a recent Study by the “Social Housing” Alliance In 2025, Germany is already missing around 550,000 apartments — particularly social housing and cheap rental properties. If the study forecasts come true, the target would even be two million social housing by 2030. With the original plan of the (old) federal government to create 400,000 new apartments a year, this figure could possibly be reached. But it is questionable how politicians will find their way out of the crisis in the future, because the outlook for the coming years is worrying: Only 225,000 to 230,000 residential units are expected to be completed in 2025 and there could be a further decline in construction completions in 2026.
Regional disparities are particularly alarming. For example, were With 6,500 new apartments built in Munich in 2024, 30 percent less than in the previous year; 1,927 apartments were completed in Hamburg, which represents a decline of 39.8 percent. In Schleswig-Holstein, on the other hand, there was a slight increase of 3.7 percent to 1,634 apartments, while Mecklenburg-Western Pomerania only recorded 58 new buildings. These figures illustrate the major regional differences and the urgent need for action in certain federal states and popular cities such as Munich or Hamburg.
Investors benefit from scarcity
The lack of new buildings has direct consequences for the real estate market. After years of decline characterized by high inflation, rising interest rates and economic policy crises, Many experts expect German real estate prices to rise again by 3 to 4 percent in 2025. On the one hand due to the mentioned housing shortage and a correspondingly strong demand or rising rents, and on the other hand due to the recent Interest rate cuts by the European Central Bank ECB, which could have an impact on construction interest rates.
But not everyone will be able to afford residential property, because the differences are massive depending on the location: Anyone looking for a detached single-family house in Munich with around 120 square meters and a garage in a medium to good residential area must expect a price of 1.6 million euros according to a calculation by Bausparkasse LBS. In Mainz, it is 750,000 euros for comparable houses, in Magdeburg only 300,000 euros.
From an investor's point of view, the profitability of real estate is also significantly influenced by the situation. On the one hand, this includes the gross rental yield, which, according to an analysis, In 2024, around 3.8 percent of the 30 German cities surveyed fraud. In some regions, however, this figure was significantly higher or lower. On the other hand, the potential for increasing the value of a property is of course decisive for investors.
Here too, the old principle applies: location, location: The residential property price index 2015-2023 shows that apartments in the largest German cities have risen the most in value. More precisely, by 72 percent in eight years. This represents an annual increase in value of around seven percent.
There could therefore be attractive opportunities for real estate buyers and investors in 2025 and beyond. For investors who do not need the living space themselves, digital shares of attractive properties an exciting option. On the one hand, interested parties can benefit from the return opportunities with a very manageable budget of just 500 euros, and on the other hand, they remain flexible and liquid with digital, tradable shares, which is of course not the case with “concrete gold.”
