Munich building permits fall 25 per cent to a five-year low

Building permits for new homes in Munich fell by 25 per cent last year to their lowest level in five years, according to a new analysis by the property association IVD reported by the tz. The association warns that the drop will keep pressure on the city’s rental market for years to come.

What happened

The number of Baugenehmigungen (building permits, the official approvals needed before construction can start) in Munich dropped from 7,118 flats to 5,366 flats compared with the year before. The tz cites an evaluation by the IVD (Immobilienverband Deutschland, a national association of estate agents and property professionals).

The longer view looks worse. According to the IVD, the number of permits was 36 per cent below the average for the years 2010 to 2020, the period before the energy crisis and the Zinswende (the turn from very low to higher interest rates).

IVD market expert Stephan Kippes told the tz that higher interest rates and rising construction costs are slowing new building. He added that demand for new-build flats had also been subdued in recent years. He said the consequences would only become visible later: “These are exactly the flats that will be missing tomorrow, and that hits quite hard.”

What it means for you

If you rent in Munich or are planning to move here, the IVD’s message is that you should not expect the rental market to ease in the long term. A building permit is the first step in a long process, so a fall in approvals today means fewer flats reach the market in the coming years. That matters most for people searching for a flat, including newcomers who arrive without an existing tenancy.

There is some short-term relief in the figures. The IVD calculated that the rise in rents has recently slowed. Compared with the spring, average rents changed by between 0 per cent and 2 per cent depending on the type of property. At the lower end were Reihenmittelhäuser im Bestand (existing mid-terrace houses, meaning not newly built), with no change. At the upper end were Doppelhaushälften im Bestand (existing semi-detached houses), up 2 per cent.

New-build homes remain expensive. According to the IVD figures reported by the tz, renting one square metre in a Neubau (a newly built property) now costs 25.60 euros on average. Ten years ago the figure was 17.40 euros.

Some practical points for residents:

• When you compare listings, use the IVD’s average of 25.60 euros per square metre for new builds as a rough guide to what new properties cost on the market.
• If you are deciding between a new build and an older property, note that the IVD figures separate Neubau from Bestand (existing housing stock), and prices differ between the two.
• If you already have a tenancy in Munich, keep that in mind before you move. The IVD expects supply to stay tight.

What to watch next

The IVD says the effects of the drop in permits will only show in the future, as the flats that are not approved now fail to appear on the market. Two things to follow:

• Whether the recent slowdown in rent rises lasts. The IVD’s latest comparison with the spring showed increases of no more than 2 per cent.
• Whether interest rates and construction costs, which Kippes names as the main brakes on new building, change enough for permit numbers to recover.

For now, the IVD’s assessment, as reported by the tz, is that Munich needs new homes urgently but the number being approved is still falling.

Source: tz