European Residential Construction Pushes Sector into the Red

By 2026, Europe will have finished building only about 1.5 million housing units (down 13% on 2023). For Germany, that means an expected decline of 35%. This is evident from projections by the Euroconstruct forecasting network, of which the ifo Institute is a member. “Due in particular to the sharp rise in construction and financing costs, it’s often no longer possible to build new homes in Germany. Politicians haven’t yet made a decisive improvement to the policy framework,” says ifo construction expert Ludwig Dorffmeister. “The resulting decline in the number of permits doesn’t bode well for the coming years.””

The residential construction climate continues to cool in most of Euroconstruct’s 19 countries. Ahead of Germany, the number of completions between now and 2026 will fall most sharply in Sweden, down 47% compared to 2023. France (down 22%) and Denmark (down 19%) follow in third and fourth place. “Construction experts report in particular that private households must contend with higher borrowing costs and reduced financial leeway,” Dorffmeister says. The need for additional apartments, quite pronounced in many places, is being pushed into the background for the time being. However, there are positive signs in Ireland (up 16%), Slovakia (up 14%), and the UK (up 12%).

Overall, investment in new residential buildings in Europe will be 6.4% lower in 2026 than in 2023. Spending on maintenance and home renovations will fall just 1.2% by 2026.

In contrast, Europe’s civil engineering is expected to see total growth of 7.5% by 2026. Experts expect above-average momentum in the energy and rail segments in particular. The water management segment will also grow at an above-average rate. “The driving forces here include political targets in energy and the environment, capacity adjustments to the transportation infrastructure, and the need for grid modernization in general,” Dorffmeister says.