Dutch bank ING reveals which construction sectors in European countries are recovering and which are struggling
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Dutch bank ING recently published its report on the outlook for construction in theEUindicating that this year a significant drop in activity of the sector. However, construction growth is likely to pick up next year.
“We expect construction volumes to decline this year (-1.5%). This is down from our previous forecast (-0.5%), mainly due to the revision of Eurostat data,” the report reads.
The European data office recently updated the EU construction data for 2023 from 0.1% to 1.4%. The growth has therefore lasted longer than expected and consequently the decline began later, leading to a larger-than-expected contraction in 2024.
“However, the signs of optimism – detected in our previous forecasts – are becoming more visible. House prices are rising further in many countries and building permits have increased.”
“Furthermore, at the beginning of the construction chain, it appears that manufacturers of building materials (e.g. concrete, cement and bricks) have reached the lowest point of production volumes.”
The lengthening of delivery times has contributed to a reduction in non-residential and residential construction volumes, as both private and corporate buyers have held off on investing in new properties.
In 2025, renovations and investments in infrastructure will increase
On the other hand, the renovation sub-sector, which also includes sustainability work, is expected to see increased demand for the rest of the year and into 2025.
The same is likely to happen for infrastructure investments, whose growth will be mainly supported by the expansion of the electricity grid, investments in digital infrastructure and the green transition.
In 2025, along with these trends, The housing market is expected to recover and permits for new homes to increase.
This could also fuel a push into the construction sector.
France and Germany continue to experience delays in construction volumes
German construction volumes fell by 2.6 percent in the second quarter of the year, reversing the growth seen in the first quarter.
The country also saw a weakening of the construction sector between 2021 and 2023, a trend that is likely to continue through the rest of the year.
The report states: “German business leaders were the most pessimistic among major EU countries in August. The continued decline in building permits for new residential projects in the first quarter of 2024 highlights the ongoing difficulties.”
“However, the civil engineering sector in Germany offers some relief. The country’s infrastructure is in poor condition and investments in roads and digital infrastructure are driving some growth in this sub-sector.”
ING also estimates that French construction production will decline by -1.0 percent this year, mainly because the country’s entrepreneurs have not yet recovered from last year’s weak results.
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Building permits for new homes are also being issued at a relatively slow pace, while falling home prices discourage new construction.
Real estate market recovers in the Netherlands, while construction growth in Spain increases
The Dutch housing market has seen an increase in building permits issued earlier this year and an increase in sales of new homes. Both trends point to a recovery in the housing market.
However, The construction production market is expected to shrink by 3 percent this yearstill under pressure from last year’s decline in new home sales and building permits.
The construction sector in Spain recorded a robust growth of 4.5 percent last year, while it stabilized in the first half of this year. This is mainly due to the fact that non-residential and residential building permits developed at a good pace in the first quarter of 2024.
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However, with production numbers plummeting by 25 percent between 2019 and 2022, Spanish construction companies are still in difficulty.
“The EU recovery fund’s investments in the Spanish construction sector are also positive,” the report says. “Therefore, we expect further growth in the Spanish construction sector in 2024 and 2025, but at a slower pace than in 2023.”
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