According to a report from Netherlands-based international bank ING, the EU construction sector is set to start recovering in 2025, with rising property prices \u2018making building new houses more attractive for project developers\u2019. However, it says the upturn will be slow and modest.<\/p>\n
The report by ING Senior Economist Construction, Maurice van Sante, says that it expects the sector to increase output by just 0.5%. This follows shrinkage of 2% in 2024.<\/p>\n
Rising property prices offer hope for new home builders<\/strong><\/p>\n Average prices of existing houses in the EU started to rise in started to rise in October 2024 giving developers the chance to ask for higher prices for new buildings, enabling them to better cover the rises in raw materials costs seen in the last couple of years. Overall, in Q3 prices of existing houses rose 1.5% to reach a record level.<\/p>\n The ING report says contractors remain pessimistic about the size of order books and describes the level of building permits issued in Q3 last year as disappointing.<\/p>\n \u201cHowever, the sharp decline we saw earlier has stopped and compared with the same period in 2023, it actually grew, albeit marginally,\u201d it says. \u201cIt does look as though the lowest point [in the market] has been reached.\u201d<\/p>\n It also predicts growth the renovation sector and investment in infrastructure to rise, driven by EU recovery funds, investment in digital infrastructure, waterworks and energy transition.<\/p>\n An ongoing issue, say some contractors, is the construction labour shortage, but fewer are complaining about the problem. Longer term to resolve the shortfall, says ING, building companies need to invest in efficiency gains through \u2018industrialisation and digitisation\u2019.<\/p>\n A problem in recent years has been the price disparity between existing homes and cost of new homes, with the latter driven by rising materials and energy costs. This, of course, has made new build houses less competitive.<\/p>\n The biggest gap between existing and new homes is seen in Germany, Spain and Turkey. But in some other EU countries, the rising price of existing houses mentioned above is encouraging the sector.<\/p>\n \u201cIn the Netherlands, the prices of existing homes have already outpaced prices of new, making Dutch new houses attractive for home buyers and allowing developers to increase sales prices to cover costs,\u201d says ING.<\/p>\n It adds that most builders across the EU remain wary about increasing prices for the time being. Only 1% of German builders plan to do so, and in France the majority are actually planning to decrease them due to sluggish demand.<\/p>\n But ING reports a slight increase in those canvassed elsewhere in the EU, like those in the Netherlands, planning to do so.<\/p>\n In the Netherlands around 40% say they will increase them over the next three months, around 15% in Poland, 7% in Belgium, about 5% in Austria and 2% in Spain. The level in the EU as a whole is 5%.<\/p>\n Individual country outlook<\/strong><\/p>\n The report also gives snapshots of the state and outlook of some individual country construction sectors.<\/p>\n It says that in December 2024, German contractors were the most pessimistic in the EU, with issue of building permits for residential developments halving between 2022 and 2024 and seeing a continuing drop in Q3 2024.<\/p>\n Civil engineering has seen some improvement, but construction volumes overall fell 3% in 2024, and no significant improvement is expected in 2025, which will mean that \u2018the EU\u2019s largest construction market won\u2019t have seen growth for five years in a row\u2019.<\/p>\n ING expects French construction output to shrink 1% in 2025, with contractor sentiment at its lowest level since the pandemic. The issuance of building permits has decreased by a third in two years. But the decline is slowing, and a more positive sign is that prices of both new and existing homes have started to increase again.<\/p>\n Netherlands building sector output contracted 3% in 2024, but an upswing is expected through 2025.<\/p>\n \u201cRising house prices, increasing sales of new houses and better-filled order books are clear signs that Dutch housing construction is picking up,\u201d says ING. There are \u2018bottlenecks\u2019 for the sector, including structural shortage of building land, but ING forecasts it will grow 1.5% this year.<\/p>\n The Spanish construction sector, says ING, is \u2018strongly recuperating\u2019. Output grew 4.5% in 2023 and 1.5% in 2024. Going forward it will benefit from a strong Spanish economy, \u2018skyrocketing\u2019 issuing of building permits and EU recovery funds.<\/p>\n The Polish building industry saw output fall 6% in 2024. But issue of building permits is increasing, prices for new and existing homes are now rising and ING forecasts overall growth in 2025 of 1%.<\/p>\n The Turkish building sector grew 5% in 2024, but industry confidence is reported as negative, with builders concerned at low order books. Issue of building permits increased in Q3 2024 but is \u2018following a bumpy road\u2019. ING forecasts industry output will grow in 2025 and 2026, but at a lower level than in 2024.<\/p>\n EU infrastructure construction output, says ING, grew just 1% in 2024, following 3.2% growth in 2023. But the producer confidence indicator for the sector is positive and ING expects it to \u2018perform positively in 2025 and 2026.<\/p>\n The Germany-based IFO economic institute takes a similar line on the EU construction sector. It states that the number of new dwellings built across Europe in 2025 will be just 1.5 million, 5.5% fewer than in 2024.<\/p>\n However, recovery will set in through the year and in 2026 an increase of 3% is expected. It also picks out Germany as a market that will continue to struggle due to high construction costs. The outlook for new home building in Austria, France and Italy is also downbeat, with the number expected to be constructed in 2026 in the former down 9% on 2025, and in France and Italy down 3%.<\/p>\n But there is greater positivity in Sweden with 2026 completions expected to rise 12%, Denmark 28% Finland 23%, Norway 13% and Poland 10%.<\/p>\n CBRE, the commercial real estate services and investment specialist, highlights Europe\u2019s urgent need for new homes. It says its housing shortage now equates to around 9.6 million dwellings, or 3.5% of the current stock.<\/p>","protected":false},"excerpt":{"rendered":" According to a report from Netherlands-based international bank ING, the EU construction sector is set to start recovering in 2025, with rising property prices \u2018making building new houses more attractive for project developers\u2019. However, it says the upturn will be … Continue reading