For three years, Wael Arabeed did not do a day's work. He delved deep into his life savings, accrued over 25 years of working on construction projects in Saudi Arabia, Syria and Egypt, to feed his family. He sold his car. He began to believe his working life was over.

But now the construction engineer has more work than he can handle. Tossing yet another tender request on to his desk, he says: "I have so many offers, I can't even look at them. I'm too busy."

Arabeed is the beneficiary of an extraordinary economic spurt in Gaza – not just in construction, but also agriculture, the hotel and restaurant industry, transport and manufacturing. All sectors have seen growth over the past year, with private sector employment increasing by more than 50%, albeit from a very low base, according to the United Nations refugee agency, Unrwa.

But it is in the construction industry that the mini-boom is most visible. After being starved of materials during Israel's three-year blockade of the Gaza Strip, the territory is cluttered with the skeletons of new buildings. Apartment blocks, hospitals, schools, hotels and mosques are sprouting all over Gaza. The rutted beachfront road in Gaza City is being transformed into a corniche.

Despite easing the blockade in 2010, Israel has maintained a ban on the import of construction materials on the grounds that they could be used to make rockets or build weapons stores or bunkers. It only allows in materials for designated UN projects, such as schools.

But illegally imported aggregate, concrete and steel is pouring through the tunnels between Rafah, in the far south of Gaza, and Egypt. During the blockade, the tunnels kept Gaza supplied with everything from chocolate to cigarettes, fridge freezers to cars, medicines to live animals. Now the black market entrepreneurs are concentrating on demand for construction materials.

In September, 9,100 tons of aggregate was legally imported into Gaza through the Israeli-controlled Kerem Shalom crossing, according to Unrwa. Almost 10 times that quantity, around 90,000 tons, came through the tunnels. Figures for steel bars show a similar pattern: 1,418 tons through Kerem Shalom; 15,000 tons through the tunnels.

Anas Najjar, shovelling aggregate hoisted from the 15m-deep, 300m-long tunnel in which he works, said the price of construction materials had more than halved as the market had become flooded – good news for the construction firms; bad news for the tunnel owners.

A ton of aggregate now fetched 95 shekels (£16) compared with 200 shekels six months ago, he said. "There are around 300 tunnels now bringing in cement, rubble and steel."

Nine men were working in his tunnel in three shifts, 24 hours a day, six days a week, bringing out 60 tons of aggregate a day, he said as trucks rumbled over the sandy expanse next to the Egyptian border, guarded by Hamas security men, collecting materials for delivery to building sites all over Gaza.

At Teba, site of the former Israeli settlement of Netzarim which was evacuated in 2005, Arabeed was supervising 25 men building classrooms for medical students at a hospital also under construction. The $35m hospital was being funded by Turkey; the $2m classrooms from Gulf donors.

"The industry is very active, for two reasons," he said. "The availability of construction materials and huge demand after the siege." Many buildings were destroyed during Israel's war with Gaza three years ago.

Materials for his project were all being supplied through the tunnels, he said. He confirmed that prices had fallen in recent months, but said they were still about 60% higher than pre-blockade levels. His main headache was the dire shortage of skilled labour: "All the construction workers are hired, but we need twice the number. We are facing a crisis in finding the right skills."

Anywhere else, skilled workers could be imported from abroad – Polish plasterers in London, Indian brickies in Dubai. But in Gaza that was impossible. The shortages had caused an explosion in wages: "There has been a 40% increase in the past six months. A skilled man can now make 120 shekels [£20] a day. That's a very good wage in Gaza."

According to Unrwa, the average daily wage in all sectors rose by 7.4% in the first six months of 2011, compared with the same period the year before. The effect of the upturn in Gaza's economy is palpable. The atmosphere is less tense and edgy than a year or two ago, helped by the relaxation of the border with Egypt, allowing Gazans to leave – and return – more easily.

But the buoyancy is not shared by everyone. Unemployment in Gaza has fallen, but one in three of the potential job market is still without work and poverty is widespread in the teeming refugee camps.

"Despite significant gains, unemployment in Gaza, as well as poverty, remains among the most severe in the world," said Salem Ajluni, an economist who compiled a report on Gaza's labour market for Unrwa.

And the mini-boom is unlikely to be sustainable. Israel still bans almost all exports, apart from a few truckloads of strawberries and flowers. Industries such as textiles and furniture, once mainstays of the Gazan economy, struggle to recover without the possibility of trade beyond the territory.

Exports stand at around 3% of their levels before the blockade, said Ajluni, adding: "Ultimately it is export capacity that will sustain growth over the long term."