Europe's housing market faces a significant downturn, with projections indicating a 13% drop in new housing units built by 2026, translating to roughly 1.5 million fewer homes.
This bleak outlook, presented by the Euroconstruct forecasting network, is especially grim for Germany, which expects a 35% decline in new construction.
Ludwig Dorffmeister, construction expert at the ifo Institute, explains: ‘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. The resulting decline in the number of permits doesn’t bode well for the coming years.’
This cooling trend extends across most of Europe, with Sweden (-47%), France (-22%), and Denmark (-19%) also projecting major reductions in new housing completions.
Dorffmeister explains: ‘Construction experts report in particular that private households must contend with higher borrowing costs and reduced financial leeway.’
However, amidst this widespread decline, a few countries buck the trend. Ireland (+16%), Slovakia (+14%), and the UK (+12%) anticipate increases in residential construction, offering a glimmer of hope in the otherwise gloomy landscape.
Investment in new residential buildings in Europe will be 6.4% lower in 2026 than in 2023 while spending on maintenance and home renovations will fall by just 1.2%.
Looking beyond housing, a contrasting picture emerges in Europe's civil engineering sector. This segment is expected to experience healthy growth of 7.5% by 2026, boosted by significant investments in areas like energy, rail, and water management.
According to Dorffmeister, ‘the driving forces include political targets in energy and the environment, capacity adjustments to the transportation infrastructure, and the need for grid modernization in general.’
