Working Paper

: Drivers of housing construction: A European comparison

We analyze macroeconomic determinants of residential building permits in Germany, France, the Netherlands, Belgium, and Austria using monthly data from 2000 to 2024, with selected variables interpolated from quarterly sources. Employing ARDL cointegration methods with bootstrap inference across six nested specifications, we identify two distinct regimes. Germany operates as a "fundamental and supply-side driven" regime where interest rates, construction cost inflation, and the unemployment rate play an important role, while house price momentum and household disposable income are less dominant drivers. France and the Netherlands display "speculative and demand-side driven" regimes dominated by income, and house price momentum, even though there are structurally different reasons for this regime. Belgium occupies an intermediate position. Austria fails to establish cointegration, consistent with a dominant non-profit housing sector. Construction cost inflation, which has accelerated rapidly in recent years, shows the theoretically expected negative sign only for Germany. Dynamic multipliers reveal adjustment periods of 2 to 13 months in most cases which is consistent with a medium-term business cycle frequency for building permits. Our findings demonstrate that housing policies should be country-specific to address heterogeneous transmission channels.

Keywords: Housing supply, building permits, ARDL modeling, Construction costs, Monetary policy transmission, European housing markets