MADELEINE McCann suspect Christian B lived in a caravan at the allotment where cops are excavating, it was reported.
Search teams with sniffer dogs and excavators were uprooting trees and sifting through earth at the site in the Germany city of Hanover for a third day.
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Christian B was identified last month as being the prime suspect in her abduction.
The plot is four miles from his last known fixed address in Hanover and just two miles from where the 43-year-old worked in a car workshop.
The suspect is said to have been living at the site in around 2007 or 2008 in a caravan after returning from Portugal, Haz.de reports.
Madeleine vanished while on holiday with her parents at the Algarve resort of Praia da Luz in 2007.
An unnamed source told Bild that Christian B had once lived on the site in a caravan for a short while.
One neighbour was said to have recognised him from the photo, and recalled seeing his yellow and white VW Camper van, which German police last month appealed for information on.
They added Christian B was often seen with the VW at the allotment where he also had two dogs and where he had often rowed with locals
Police worked throughout the night in what Wolfgang Kossak, who lives in a neighbouring property, said was “ominous”.
He recalled recalled a stranger who “caused a lot of trouble” visiting the site around 2006 and 2007.
Divers were also spotted by locals searching the River Leine in the nearby town of Seelze.
Forensics officers and a search team clutching shovels, rakes and plastic evidence bags then moved in to sift through the dirt for clues.
Possible evidence was taken away as specially trained sniffer dogs concentrated on a tunnel at the site.
Search teams were seen arriving for a third day of searches at the allotment site, which has been fenced off.
Two small tents have been set up in a field opposite the main excavation site.
A fleet of police vehicles lined the side of the small country road as commuter traffic drove past.
Ground-penetrating radars scoured the decades-old tunnels, where prisoners were forced to labour in World War Two.
It is just a few minutes drive from the flat and about three quarters of an hour on foot.
His favourite pub at the time, the Havana Bar is also nearby, Bild reports.
It comes as he dropped his bid to be released early from prison where he is serving 21 months for drug offences.
Forensics have been probing land between Hanover-Ahlem and Seelze-Letter since Monday.
Locals said up to 100 police officers have been at the scene.
The allotment is an hour's drive from the town of Braunschweig, the last fixed home of Christian B.
In a statement, prosecutor Julia Meyer said: "I can confirm that the search is in connection with our Madeleine McCann investigation.
"However, I will not comment on the background and aim of this action or the status of the ongoing investigations."
Christian B lived an itinerant lifestyle and is known to have lived in Hanover itself in 2010.
Hanover’s district court sentenced Christian B for falsifying documents in 2010, and then three years later he was sentenced for a joint theft.
Christian B is a lifelong paedo who chased a fantasy playboy lifestyle to cover up his warped sex crimes, The Sun reported last month.
The German criminal was first convicted of abusing children aged 17 back in 1994 - a year before he is believed to have moved to Portugal.
Returning to Germany, he then lived in Hanover - where he is linked to the murder of Monika Pawlak, 24, who vanished in the early hours of New Year's Day 2010.
Her dismembered body was found on January 4 in two blue rubbish bags in a river.
He moved to Braunschweig, in 2014 and opened a kiosk in the city, which is around 40 miles from Hanover.
Staff at the kiosk recalled his bizarre and chilling behaviour including one time when he shouted “The child is dead... pigs eat human flesh" when talking about Madeleine.
He also said "there are ways to make a body disappear" as they discussed the toddler's disappearance.
A former friend said Christian B fantasised about creating a Josef Fritzl-style dungeon at his home.
Christian B's pal said: "He had a cellar and he said he wanted to line it with heavy plates, like the guy in Austria."
A former neighbour of the career criminal said he was "often very aggressive".
German police previously discovered a a trove of pictures and videos allegedly buried by Christian B at a German box factory in Neuwegersleben.
Detectives confirmed in that find they dug up 8,000 pieces of potential evidence.
It is alleged at least some of this disturbing material includes videos and pictures of his suspected crimes.
The files were found on hard drives and USB sticks in a plastic bag - and it was buried alongside his dead dog at the dilapidated and rubbish filed site.
Chief prosecutor Hans Christian Wolters however declined to confirm if any of these pictures and videos includes evidence linked to the Madeleine case.
The new probe is a joint operation between the prosecutor's office and the Federal Criminal Police Office.
Maik Niemtschke, who lives in Hanover, told Sky News the main area of the search is on land where there is a bungalow, which is being used as a second home, and a garden shed.
Niemtschke said the area is located between a road and a river
McCann was three at the time of her disappearance from an apartment while her family vacationed in the seaside town of Praia da Luz, in Portugal’s Algarve region, in 2007.
Police have just 22 months to nail the prime suspect in the abduction of Madeleine, according to her family’s lawyer.
Rogerio Alves says the clock is ticking on the 13-year mystery due to a 15-year time limit on prosecutions in Portugal.
He told ITV: “We have a 15 years time barrier, even to manslaughter, to homicide, to certain sexual offences — and even to the most serious kind of kidnapping.
“So we are still on time. But time is getting short now.”
German police sources told The Sun they feared the final piece of puzzle was still missing to bring a case against Christian B.
However, others remain optimistic that German police have an "ace up their sleeve" to formally charge him.
Christian B's timeline of crime
CHRISTIAN B was a career criminal and repeat sex offender who lived in Portugal when Madeleine went missing in 2007.
1976: Born, probably in Bavaria, Germany.
1992: Some minor crimes before a string of thefts.
1994: On trial for the first time, aged 17, for child sex abuse and sentenced to two years.
1995: Got out early and started dealing drugs.
1996: Goes to Portugal with his then girlfriend. Thought to have been living between Germany and the Algarve from as early as the mid-1990s.
1999: Arrested in Portugal and extradited to Germany, where he serves a youth sentence.
2005: He ties up, rapes and robs an American woman, 72, in her home near Praia da Luz, but is not caught.
2006: Lives in a bungalow about two miles from the Ocean Club, in Praia da Luz. In this year, thieves steal a camera showing a brutal rape and attack, which eventually leads the police to him.
2007: Christian B lives in a VW T3 camper van near one of the McCann’s favourite beaches. A 1993 Jaguar saloon with German plates, owned by him, has its registration swapped on May 4 — the day after Madeleine’s disappearance.
2010: Returned to Hanover in Germany and began living in a caravan while working in a car repair shop.
2011: District court in Niebüll, Germany, gives him a suspended sentence for drug dealing which is later activated and he is jailed.
2013: He sexually abuses another child, it is claimed.
2014: Christian B is in Braunschweig, Germany, where he claimed to be starting a business.
2016: Braunschweig district court gives him a year and three months jail for “sexually abusing a child in the act of procuring and possessing child pornography”.
2017: From June he is held on pre-trial remand over child pornography charges before being jailed in July. Christian B is convicted of assault.
2018: He is released in August, but is homeless. Police monitor him but then German authorities have him arrested in Milan in September after he flees to Italy. He is jailed for drug offences. He is then jailed for rape.
2019: He is hit with another prison sentence for violation of the Narcotics Act and then charged with the 2005 rape of the 72-year-old American in Praia da Luz. Now 43, he is jailed for seven years.
2020: While in prison he is hit with another jail sentence for drug offences.
Madeleine is believed to have been snatched from the Ocean Club apartment where she was sleeping alongside her twin siblings Sean and Amelie on May 3, 2007, in Praia du Luz.
Christian B is known to have lived in a remote property in the hills outside Praia de Luz but abandoned it and began living in a 1980s VW T3 Westfalia camper van some time in late 2006.
He allegedly made his living through petty crime such as breaking into holiday lets - and is known to have owned a mobile home he boasted could carry "drugs and children".
Christian B is currently in jail in Germany for drug offences and the rape of a US woman in Portugal in 2005.
Described as a "twisted loner", the sex offender is understood to have been a kind of drifter around the resort at the time.
Christian B was first linked to the Madeleine case after he allegedly made a drunken boast he snatched her while in a bar on the tenth anniversary of the crime.
Madeleine would have turned 17 last month, and the family have described the identification of Christian B as "potentially very significant".
MORE ABOUT MADELEINE MCCANN
Experts have said Christian B matches the profile of a Jimmy Savile-style “paraphiliac”, who targets victims of all ages.
His ex-lawyer Serafim Vieira has described him as having "'psychopathic traits" and admitted he could be responsible for Madeleine's abduction.