November 8, 2016 / 8:00 AM / a year ago

German construction association lifts growth forecast for 2016

BERLIN, Nov 8 (Reuters) - Germany’s ZDB construction association on Tuesday raised its sales forecast for 2016 due to a building boom in real estate and higher state spending on infrastructure, suggesting the sector will propel growth in Europe’s biggest economy this year.

ZDB head Hans-Hartwig Loewenstein said he expected sales growth of 5.5 percent to 106.5 billion euros this year and a further increase of 3.0 percent to 110 billion euros in 2017.

“Construction is doing well,” Loewenstein said, adding that firms were vying for skilled workers and prices for building services would rise by 2 percent.

Strong demand for homes is fuelling a construction boom that is helping to support the German economy at a time when exporters, who traditionally drive growth, are struggling due to a slowdown in some of their major markets such as China.

The property boom has been encouraged by the European Central Bank’s ultra-low interest rates, a growing urban population and unexpectedly high immigration over the past five years.

As a result, the number of newly completed apartments is expected to jump to some 290,000 this year from 248,000 in 2015, Loewenstein said. For 2017, the association forecasts the completion of 300,000 residential units.

The ZDB association includes more than 35,000 small- and medium-sized firms that form the backbone of Germany’s construction sector.

The HDB association, which represents large industrial construction firms such as Hochtief, has said orders reached a level last seen during the boom times following unification and the economic upswing in East Germany in the mid-1990s.

The government expects soaring private consumption, increased state spending and higher construction activity to help the economy to grow by 1.8 percent this year, which would be the strongest rate in five years. (Reporting by Michael Nienaber; Editing by Andrea Shalal)

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