May 18, 2017 / 8:44 AM / in 6 months

UPDATE 1-German dwelling permits drop in first quarter of 2017

* Residential building permits fall 7 pct on the year

* First yearly drop in a quarter since 2012

* Data suggests construction boom could peter out

* Against trend, approvals for apartment buildings rise (Adds quotes, data details, reaction from construction association)

By Michael Nienaber

BERLIN, May 18 (Reuters) - Residential building permits issued in Germany fell around 7 percent on the year in the first three months of 2017, data showed on Thursday, suggesting the construction boom in Europe’s biggest economy could lose momentum in coming months.

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.

But data released by the Federal Statistics Office showed 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 means that the number of approved dwellings fell for the first time on the year 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 the “apartment building” sub-category, viewed as crucial to avert housing shortages in urban areas, the number of approvals rose by 5.5 percent to 37,601, the highest level recorded in a first quarter in 20 years, the office said.

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.

“We’re talking here about a slight decline from a very high level,” Andreas Geyer from the ZDB construction association said.

He pointed out that construction measures on existing buildings fell in particular, which was due to the very high prior-year level.

“The trend is still pointing upwards, especially for apartment buildings. And that’s the development we need to counter housing shortages in big cities. So it is too early to talk about a trend reversal in the construction sector.”

Geyer said the association would stick to its forecast.

The ZDB and other construction industry associations said in January they expected 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 Jeremy Gaunt)

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