Germany ended 2025 with 760'700 approved homes still unbuilt
At the close of 2025, Germany was carrying 760'700 dwellings that held a building permit but had no completion, according to the Federal Statistical Office (Destatis). The number barely moved from the 759'700 recorded a year earlier. Of that backlog, 307'200 were under construction. The rest, more than 450'000 homes, were approved and waiting.
A permit records an intention to build and a completion records a building, and Germany's housing problem now sits in the space between the two. The country completed 206'600 homes in 2025, the lowest count since 2012 and 18% fewer than the year before, while permits rose 10.6% to 238'100. With approvals up and completions down, the queue of approved-but-unfinished projects stayed roughly where it was. Here is what that queue measures, why projects sit in it, and what it says about where the shortage of finance now bites.
What the construction overhang (Bauüberhang) actually is
The construction overhang, or Bauüberhang in German, is the running total of dwellings that have been approved but not yet completed. It covers projects under construction, projects stalled at the shell stage, and projects that hold a valid permit but haven't broken ground. Destatis has tracked the measure since 1995.
For years the overhang was read as stored-up supply, a pipeline waiting to be built out. That reading is harder to hold now. When approvals keep rising and completions keep falling, a growing share of the backlog is made up of projects that cannot get started.
Why approved projects stall
A project stalls when its numbers stop working somewhere between the permit and the build. Construction costs rose and stayed high, financing became more expensive as rates climbed, and the time from permit to completion has stretched to 27 months on average, up from 20 months in 2020 and as long as 34 months for the apartment blocks cities need most. Each of those pressures eats into the same margin.
The clearest evidence sits in the permits that lapsed. In 2025, 35'700 German building permits expired unused, the highest number since 2002 and about a quarter more than the year before. These schemes were sound enough to clear the planning authorities; what they could not clear was the cost of building and the cost of money.
The pattern runs across Europe
Germany is the sharpest case, though far from the only one. Euroconstruct, the research network that works with the Ifo Institute, put 2025 completions across its member countries at about 1'500'000 homes, down 5.5% on 2024 and the weakest year in a decade (as reported by Bloomberg).
The detail varies by market. ING's construction team had EU output falling 1.5% in 2024, flat through 2025, and only edging back to 1.5% growth in 2026. France stays weak, with permits slipping again from late 2025. Spain runs the other way, with permits and contractor confidence recovering on the back of stronger growth. Germany is the hardest hit of the large markets: completions there are forecast to drop 44% between 2023 and 2027, the steepest fall on the continent.
The causes are similar from country to country: scarce land, slow approvals and high build costs, with the electricity grid or environmental rules adding delays of their own in some markets. Demand, meanwhile, has not eased. Germany alone is short of around 1'400'000 homes, on the Pestel Institute's estimate.
What it means for property finance
When completions fall while permits hold, the bottleneck has moved from planning to funding. A developer with a permit, a site and buyers still needs capital on terms that let the project's numbers work, and for many mid-market schemes that capital became harder to find as banks pulled back from development and construction lending and narrowed what they would take on.
That is why secured private lenders watch this part of the market closely. The collateral can be inspected (a permitted site, security registered against it, a defined exit), the need is pressing and tied to dates, and a bank's credit process often runs slower than a developer's window allows. Private credit grew up in that mismatch.
One caveat belongs next to that observation. A financing gap rewards capital that can move quickly only when the diligence underneath it holds, and money that arrives fast on a poorly structured file is how a stalled project becomes a failed one. The checks have to come first, and the speed has to come from having prepared them.
Where Watson AM fits
Watson AM arranges secured real estate financing for mid-market developers across eleven European markets, funded by the investors and capital partners in our network, who each assess a project before deciding to fund it. Every file runs through our nine-step due diligence before it is presented: legal review with Swiss and local law firms, verification of the conditions precedent list, a security package designed for the deal, notarial registration, and monitoring for the life of the facility.
In a market where approved projects stall for want of funding, that sequence is what lets a sound scheme be financed on a developer's timeline. Two of our twelve published case files, a Geneva residential development and a construction plot in Barrow-in-Furness, came to us after their developers had spent 18 months to two years searching elsewhere; both projects were viable, and what they lacked was a financing structure built around them.
We don't take every file, and we don't present one to investors that we haven't assessed ourselves. What the overhang shows is that the binding constraint on European housing has moved towards financing, and that secured lending against well-examined collateral has a real part to play in releasing it.
Investor and borrower material is available on request.
Common questions
What is the construction overhang (Bauüberhang)?
The construction overhang is the total number of dwellings that hold a building permit but haven't been completed. It includes homes under construction, homes stalled mid-build, and permitted projects that haven't started. Germany has measured it since 1995.
How many approved homes are unbuilt in Germany?
At the end of 2025, Germany had 760'700 approved but unfinished dwellings, according to Destatis. About 307'200 were under construction; the remainder were approved and not yet under way.
Why are approved housing projects not getting built?
High construction costs, more expensive financing, and longer build timelines have made many permitted projects unviable. In 2025, 35'700 German permits expired unused, the most since 2002.
Is this happening across the rest of Europe?
Yes. Euroconstruct estimated about 1'500'000 completions across its member countries in 2025, down 5.5% and the lowest in a decade. Germany faces the steepest fall, with completions projected to drop 44% between 2023 and 2027.
What does the housing backlog mean for property finance?
With permits holding and completions falling, the constraint has shifted from planning to funding. Permitted projects with real collateral increasingly need financing that banks have stepped back from, which is the gap secured private-credit lenders address.
Watson AM, Basel. This article is general market commentary for professional and qualified investors and for real-estate developers. It isn't investment, legal, or tax advice, or an offer of any financial product.
Sources
- Federal Statistical Office (Destatis), housing completions and construction overhang 2025, published 22 May 2026.
- Federal Statistical Office (Destatis), building permits, 2024 and 2025.
- Eurostat, building permit index.
- Euroconstruct / Ifo Institute, European housing completions 2025 (reported via Bloomberg).
- ING Think, European construction outlook, 2025 and 2026.
- Pestel Institute, German housing shortfall estimate.