German building permits rise 6.8% in August as financing costs weigh on builders

Permits rise again in August

Authorities approved building permits for 20,600 new dwellings in August, 6.8 percent or 1,300 more than in the same month a year earlier, the Federal Statistical Office (Statistisches Bundesamt) said. The increase extends the first-half upswing, when permits rose a little over 15 percent, the strongest first-half gain since 2016. From January to August, permits covered 169,400 dwellings in new and existing buildings, about 12.1 percent or 18,300 more than a year earlier. New-build permits alone reached 137,500 dwellings, up 12.7 percent.

Apartment buildings drive the gains

Apartment buildings remained the main driver. Through August, authorities approved 90,600 new apartments in multi-family houses, 14.5 percent more than a year earlier. Permits for single-family houses rose 7.8 percent to 31,500, while two-family houses gained 21.7 percent to 10,000. Permits for residential homes fell 2 percent to 5,300.

The numbers do not yet mean finished homes. Felix Pakleppa, chief executive of the Central Association of the German Construction Industry (ZDB), said an approval is not the same as a built dwelling.

An approved apartment is not automatically a built apartment.

Pakleppa also pointed out that January to August 2026 was still about a third below the same period of 2021, when more than 250,000 dwellings were approved. He said around 450,000 approved apartments were on hold at the end of 2025 because construction did not pay for many developers. Completions in 2025 fell 18 percent to 206,600, the lowest level since 2012, while estimates put the national shortage at more than one million homes.

We are recovering from a historic low, and we are still far from a normal level.

Financing costs and sentiment

The European Central Bank raised its key rate twice this year, in June and in September, to 2.50 percent. Handelsblatt reported that ten-year construction loan rates have climbed above 4 percent on inflation worries, and that materials and energy have become more expensive because of the Iran war. The ifo Institute's business climate index for residential construction fell to minus 25.1 points in September from minus 22.5 in August. Klaus Wohlrabe, who heads ifo's surveys, said the prospect of higher financing costs weighs on the industry.

Economists at the Kiel Institute for the World Economy (IfW) doubt that all approved projects will be built. Steffen Zetzmann told Reuters that higher construction rates can slow new building when rents do not cover the higher financing and building costs.

If that does not succeed, new construction is likely to decline.

Government response

Federal construction minister Verena Hubertz (SPD) said a federal housing company would start in 2027 and that the government would present its concept in the autumn. Handelsblatt reported that the company, planned together with finance minister Lars Klingbeil (SPD), is meant to help end the building crisis, a task the previous Ampel coalition failed to solve. Hubertz said the company should be lean and not another authority, and that it would not act as a new building firm but work with partners already on the market. The government is also pushing a so-called Bau-Turbo to speed up approvals, and the building ministry has raised subsidies for new homes meeting the EH 55 energy standard.