Construction permit index overview
Data extracted in October 2020.
Planned article update: October 2021.
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.
The building permit indices for the EU peaked in late 2006 / early 2007 and then began a continuous and rapid downturn which lasted 2 years. During the years 2010 and 2011 the index level remained relatively stable, in the following years it decreased again although by far not as dramatically as before. During the years 2015 to 2017 the index levels increased slightly. Since then the index levels have remained stable. In the summer of 2019 the level was still at the level to which it had dropped during the financial and economic crisis. In the first half of 2020 the index dropped again (probably as a consequence of the Covid-19 crisis) but by far not to the extent during the years 2007 – 2009.
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. Between 2010 and 2019 the index for the number of new buildings increased in almost all Member States (the only exception being Luxembourg), in a large number of countries the index more than doubled. The index for the useful floor area developed in a broadly similar fashion.
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 (EC) No 1165/98 is at least one quarter. Several Member States provide data on a monthly basis. The data are generally available 3 months after the end of the reference period.
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 largely comparable to the development of actual work (Figure 2). 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).
- Construction, building and civil engineering (NACE F) (t_sts_cons)
- Building permits (teiis540)
- Construction, building and civil engineering (NACE F) (sts_cons)
- Building permits – index (sts_cons_per)