Construction permit index overview

From Statistics Explained

Data from June 2014. Most recent data: Further Eurostat information, main tables and database.

The indices for building permits are business cycle indicators providing information on the development of granted building permits in the European Union (EU).

Short-term statistics provide two types of indices for building permits. The so-called "dwelling index" simply reflects the evolution in terms of the number of dwellings.A second indicator, the "floor area index" reflects the development of the useful floor area for which the building permits are issued (where the useful floor area cannot be ascertained, an alternative size measure may be used).

The building permits index for the number of permits covers one-dwelling residential buildings and residential buildings with two or more dwellings but not residential buildings for communities (e.g. residences for the elderly) (see Classification of types of construction (CC)). The building permits index of useful floor area covers all types of residential buildings and also other buildings, for example hotels, shops, warehouses, industrial buildings, schools and hospitals.

Figure 1: EU-28, Building permits (number and floor area) 2000-2014, quarterly data, seasonally adjusted, (2010=100), Source: Eurostat (sts_cobp_q)
Table 1: Construction permits, number and floor area, annual rates of change, gross data, 2005-2013, Source: Eurostat (sts_cobpgr_a)
Figure 2: EU-28, Building permits and construction output, quarterly data, seasonally adjusted (2010=100), Source: Eurostat (sts_cobp_q) and (sts_copr_q)

Main statistical findings

For the EU-28 the dwelling indices peaked in the last quarter of 2006 and then began a relatively continuous downturn which lasted almost 3 years. In 2009 the bottom of the cycle appears to have been reached. For the last 4 years the index remained rather stable at a level which was far below the pre-crisis peak. Furthermore a slight downward trend can be noted. Figure 1 shows that both indicators for residential buildings (excluding buildings for communities), i.e. the indicator for the number of dwellings and the indicator for the floor area develop in a very similar fashion. Figure 1 also presents the area-index for non-residential buildings. This indicator reacts with a certain delay compared with the indicators for residential buildings.

The development of building permits is rather heterogeneous at the level of the individual Member States. In several countries the indices for the number of buildings or the useful floor dropped by half or even more during individual years while in some countries even two-digit growth rates were recorded for the same periods. Generally, the negative development between 2005 and 2012 was most pronounced in Ireland, Greece, Spain and Portugal. Ireland however came back to positive growth rates in 2013. In Poland, Lithuania, Romania, Austria and Luxembourg the development between 2005 and 2013 was even positive although all countries recorded negative rates of change in certain years.

Data sources, aggregation and availability

Information on building permits is generally collected from the authorities who issue the permits (often municipalities). As the collection of information is exhaustive, questions of sample sizes, weighting etc. do not apply. The mandatory reference period under the Short-term statistics Regulation 1165/98 is at least one quarter. Several Member States actually provide data on a monthly basis. The data are generally available 3 months after the end of the reference period.

Context

A building permit is granted by public authorities in response to an application and based on a specific building plan. It is the final administrative authorisation to start work on a concrete building project and one of the last steps before actual construction work starts. Works for which no permit is required will generally be rather limited. Therefore the development of the indicator of building permits is rather close to the development of actual work. However the leading indicator quality of the permits has to be interpreted with some care as there is no immediate link between the two. In none of the countries covered by the short-term statistics regulation does the permit imply an obligation to start the construction. Therefore some permits might not be used by the builders and the index for building permits might overestimate future building activities. Moreover, the time between the issue of the permit and the start of the construction work can vary depending e.g. on the type of construction, on the business cycle or the country. Even if there was a regular delay between the permit and the start of the construction work the statistical connection between development of permits and development of construction output could still vary depending on how fast or slow the construction work proceeds. In cases where a building permit is withdrawn the indicator will not be adjusted for this effect. There might also be some double counting if the same construction project is recommenced later with a new permit, the first permit having expired.

The financial crisis of 2007 – 2010 which was triggered by the downturn of the US housing market and which resulted in substantial losses of construction output highlighted the need for more information on the housing market. The building permit indices were therefore integrated into the list of 'Principal European economic indicators' or 'PEEI' (together with residential property prices and house sales).

See also

Further Eurostat information

Publications

Main tables

Construction, building and civil engineering (NACE F) (t_sts_cons)
Building permits (teiis540)

Database

Construction, building and civil engineering (NACE F) (sts_cons)
Building permits – index (sts_cons_per)

Dedicated section

Methodology / Metadata

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