Construction of one of Germany's tallest buildings has suddenly halted midway after the developer stopped paying its builder, yet another ominous sign for the nation's troubled property sector.

Signa, the Austrian property giant and an owner of New York's Chrysler Building, had been making steady progress this year on the planned 64-story Elbtower skyscraper in Hamburg.

But Signa, founded by René Benko, has fallen behind on its payments to its builder, Lupp, an executive of the construction firm said.

"Our construction activities at Elbtower have been temporarily suspended due to outstanding payments from the developer," Matthias Kaufmann, who oversees Lupp's finances, said in an email to Reuters.

Signa didn't respond to requests for comment. The city of Hamburg and a minority investor, the real-estate subsidiary of Germany's Commerzbank (CBKG.DE), confirmed the stoppage.

The interruption raises questions about the future of the tower, with an estimated value of 1.3 billion euros ($1.38 billion) upon completion. It has also prompted warnings from city officials, and is another indicator of troubles hitting the property sector in Europe's largest economy.

The real-estate sector was a bedrock of Germany's livelihood for years, accounting for roughly a fifth of output and one in 10 jobs. Fuelled by low interest rates, billions were funnelled into property, which was viewed as stable and safe.

Now a sharp rise in rates and building costs has put an end to the run, tipping developers into insolvency as bank financing dries up, deals freeze and prices fall.

Commerz Real, the Commerzbank subsidiary, said talks were ongoing with Signa and Lupp to "find a common solution" and it expected building to resume.

Elbtower is in the HafenCity district that is also home to a new concert hall, the Elbphilharmonie. Tenants are to include a Nobu hotel and restaurant, the risk advisor Aon (AON.N), and a local bank.

Timo Herzberg, CEO of Signa Real Estate, hosted viewers just weeks ago to the site as the shell of the building neared 100 metres (330 feet) high.

"The distinctive concrete pillars now give an increasingly clear idea of the shape that Hamburg's future landmark will have once it is completed," he posted on LinkedIn.

Karen Pein, Hamburg's senator for city development and housing, warned that Signa needed to stick to agreed milestones or face consequences.

A contract "allows the City of Hamburg to dismantle the construction work performed to date, sell it to a third party for completion, or complete the construction itself," she said in a statement.

($1 = 0.9406 euros)