Bavaria starts 2023 with significantly fewer permits than in the same months of the previous year

Construction activity in Munich in 2022 is significantly weaker than the Bavarian average in view of the turnaround in interest rates and the tightening of the SoBoN

“In residential construction, the strong braking effects of the enormously increased construction prices, high interest rates and the continuously growing demands on new buildings are becoming increasingly visible,” analyzes Prof. Stephan Kippes, head of the IVD market research institute. At the end of 2022, the development was finally reflected in the noticeably declining number of building permits. According to the State Statistical Office, the number of building permits in Bavaria in 2022 was 65,306 property units and thus a considerable -4.7% below the previous year’s level. In the state capital, the decline in building permits is even more massive with a drop of almost 14% (2022: 6,677 vs. 2021: 7,756).

In Munich, in addition to the trend reversal in interest rates, the considerable tightening of the SoBoN is having a massive braking effect, which prevents the creation of privately financed and subsidized apartments. “SoBoN stands for Socially Just Land Use; it is applied to all development plans that trigger costs and burdens and lead to a significant increase in land value. However, it is important that the SoBoN is designed in such a way that property developers do not shut down their activities because of this,” says Prof. Stephan Kippes.

It can increasingly be observed that potential buyers or those willing to build are withdrawing. It is also to be feared that more and more projects that have already been approved will be postponed or stopped. The orders received in the main Bavarian construction trades illustrate the precarious situation: According to the State Statistical Office, in January 2023 these amounted to a nominal total value of around €335 million in the residential construction sector (-28.8% compared to January 2022). The situation improved somewhat in February 2023, with an increase of over 6% compared to the same month last year. The positive result is due to large orders in two Bavarian administrative districts.

With regard to building permits, there is still no sign of a turnaround in the Bavarian trend at the beginning of 2023. In January 4,583 and in February 4,046 new apartments were approved for residential construction. In comparison to the same months of the previous year, declines of between -20% and 29% have been recorded.

In Munich, significantly higher building permit numbers were determined in January and February 2023 compared to the same months of the previous year. In January 2023, 565 (prior year month: 227) and in February 2023 982 (prior year month: 580) permits were issued.

Source: IVD