The European residential construction sector is facing a significant decline, with new housing completions projected to drop by 8.5 percent by the end of 2024. Germany is expected to experience a steeper decline of 15 percent, driven by high construction costs. The downturn is more pronounced in the Nordic countries, where Finland and Sweden could see housing completions nearly halved. However, positive trends are noted in Poland, Ireland, and Spain. The focus in residential construction is shifting towards maintaining and modernizing existing homes, while civil engineering projects are expected to maintain stable demand, supported by national and EU funding.
The number of newly built residential units across Europe is projected to decrease significantly, with expectations of 1.6 million units by the end of 2024, marking an 8.5 percent decline from the previous year, according to the IFO Institute for Economic Research. Germany is expected to see an even steeper drop, with a 15 percent reduction in completed housing units, as reported by the Euroconstruct forecasting network, cited by IFO.
Ludwig Dorffmeister, a construction expert at IFO, pointed out that European residential construction is facing challenges due to higher interest rates and reduced purchasing power. In Germany, the situation is worsened by considerably higher construction costs. The decline in residential construction is more severe in the Nordic countries, with Finland and Sweden expected to see their completed housing units nearly halved this year. Norway is slightly better off, with a projected 22 percent decrease. In contrast, some regions of Europe are showing positive trends. Poland is expected to have a 4 percent increase in housing completions, Ireland 10 percent, and Spain 15 percent.
Ludwig Dorffmeister noted that in Spain, while construction activity will remain low, over 100,000 housing units could be completed in 2025 for the first time since 2012. By 2024, new construction is expected to have a reduced impact on the residential sector, with its share falling to 37 percent compared to 58 percent in 2006. The emphasis is increasingly moving towards the maintenance and modernization of existing housing as observed by Dorffmeister.
Despite these difficulties, experts foresee steady demand in the civil engineering sector. Expanding and improving infrastructure continues to be a priority across all countries. Funding for these projects is expected to come from relatively stable sources, such as multi-year national investment funds and EU financing.
In conclusion, The European residential construction sector is facing a significant downturn, with the number of newly built housing units projected to decline by 8.5% across Europe and even steeper in Germany by 2024. This is driven by factors such as rising interest rates, reduced purchasing power, and higher construction costs. While some regions like Poland, Ireland, and Spain are seeing positive trends, the Nordic countries are experiencing a more severe situation. The focus is shifting towards the maintenance and modernization of existing housing, as new construction's impact on the residential sector is expected to decrease. In contrast, the civil engineering sector is expected to remain relatively stable, with steady demand and funding from sources like national investment funds and EU financing for infrastructure development and maintenance.
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