New residential building permits issued in Germany increased by more than 20 percent on the year in 2016, Housing Minister Barbara Hendricks said on Sunday, suggesting a building boom will continue to support economic growth this year.
Demand for real estate is soaring in Europe's biggest economy due to a growing population, increased job security and record-low borrowing costs. Increased state spending on social housing, not least to accommodate a record influx of refugees, is giving construction an additional push.
"We have succeeded in initiating a turnaround in housing construction within a very short time," Hendricks said in a Reuters interview.
Permits were issued for more than 380,000 residential buildings in 2016, a sharp increase from the 313.000 permit issued in the previous year, she said.
"That's the highest number of permits issued in a year since 2000," Hendricks said.
The construction sector is forecast to continue its solid performance, helped by housing shortages in urban areas and low interest rates that have encouraged more people to buy homes instead of renting.
Construction industry associations expect sales to rise by 5 percent this year to hit the highest level since 1995, following growth of 5.8 percent in 2016.
Construction is one of the main drivers of economic expansion in Germany, contributing 0.3 percentage points to an overall GDP growth rate of 1.9 percent last year, the strongest in half a decade.
Even before the refugee numbers started to increase in 2015, urban areas lacked an estimated 800,000 affordable flats due to higher immigration from other European countries.
With demand outstripping supply, property prices and rents have soared in cities like Berlin, Hamburg and Munich.
Property experts say that at least 350,000 new homes are needed every year until 2020 to cope with the drastic shortage of affordable housing.
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