Berlin (AFP) - A building earmarked to house asylum seekers was set ablaze overnight, German police said Saturday, in an eastern town where the mayor recently resigned over far-right protests against his plans to house refugees.

Markus Nierth, mayor of Troeglitz in Saxony Anhalt state, stepped down last month saying he felt abandoned by local authorities in facing neo-Nazi hostility over his support for accommodating about 40 refugees in the small village.

The fire broke out early Saturday in the building set to become a home for asylum seek in May, and "no one was hurt," a police spokeswoman told AFP.

Police later said in a statement that "one or several people caused the fire" and that "it appears an accelerant fuel was used in the blaze".

The damage from the fire has made the building uninhabitable for the moment, police added.

A German couple, the only people in the building at the time of the fire escaped unharmed, thanks to neighbours who alerted them, police said.

Interviewed by the daily Tagesspiegel, ex-mayor Nierth said he "felt helpless, angry and sad all at the same time" over the latest incident.

"The brownshirt (Nazi) contagion has gone so far that they prefer to burn down the homes in which families could find a new life," he said, referring to the anti-immigrant sentiment of the far-right and neo-Nazis.

Germany, which has become Europe's top haven for people fleeing conflict, saw populist marches in recent months in the eastern city of Dresden railing against the "Islamisation" of Europe.