May 18, 2017 / 7:02 AM / in 2 months

German dwelling permits drop in first quarter of 2017

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Construction workers prepare concrete formworks in Berlin, Germany May 17, 2017.Hannibal Hanschke

BERLIN (Reuters) - Residential building permits issued in Germany fell by some 7 percent on the year in the first three months of 2017, data showed on Thursday, in a sign that a construction boom in Europe's biggest economy could peter out soon.

Home building has become a key driver of economic expansion in Germany as a growing population, increased job security and record-low borrowing costs are propelling demand for real estate.

Higher state spending on roads, bridges and social housing, also to accommodate a record influx of refugees over the past two years, are giving construction an additional push.

Data released by the Federal Statistics Office showed, however, that German authorities issued 5,600 fewer residential building permits in the first three months of the year compared with the first quarter of 2016.

This was the first yearly drop since the first quarter of 2012, the office said.

A breakdown of the data showed permits were issued for 70,232 new dwellings and construction work was approved for 8,919 existing buildings in the first quarter.

The total of 79,151 permits represented a year-on-year fall of 6.6 percent, suggesting that construction and furnishing firms could expect less orders in the coming months.

Approvals for the 'hostel residences' sub-category, which also includes shelters for asylum seekers, edged up 2 percent on the year to 5,264.

In 2016, new residential building permits issued in Germany jumped by more than 20 percent on the year to reach a 17-year-high at 375,400 units.

Construction industry associations said in January they expect sales to rise by 5 percent this year to hit the highest level since 1995, following growth of 5.8 percent in 2016.

Higher investment in buildings contributed to a quarterly growth rate of 0.6 percent in the first three months of 2017, the Federal Statistics Office said last week.

Construction also drove economic growth last year, contributing 0.3 percentage points to a GDP expansion of 1.9 percent last year, the strongest rate in half a decade.

Reporting by Michael Nienaber; editing by Ralph Boulton

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