Construction volume in the 19 countries of the Euroconstruct research group will increase by 3.5 percent this year. “This is the strongest growth rate seen in Europe since 2006, or before the outbreak of the financial crisis“, said ifo expert Ludwig Dorffmeister. “Construction demand also picked up this year in all 19 Euroconstruct member countries, with residential construction currently providing the strongest stimuli,” he added. This situation is expected to continue, with construction volume set to grow by a total of 6 percent through 2020.
“In residential construction and other construction segments growth rates will weaken considerably, while civil engineering will take over the role of market driver in the mid-term,” noted Dorffmeister. Civil engineering will grow by over 4 percent in 2018 and 2019 respectively. “This is also unprecedented,” he added. At the same time, the new construction sector will lose impetus significantly in the years ahead. In 2020 the refurbishment of existing buildings will grow more strongly than new construction for the first time since 2014.
In Germany construction activity in 2017 will even increase slightly more strongly than in 2016, driven by strong demand for living accommodation, increased corporate investment activity and the German federal government’s civil engineering offensive. Although growth will slow considerably in the mid-term, there will also be large-scale investment in residential and infrastructure construction.
The favourable development in construction demand is partly due to robust economic growth and its positive implications for household income, corporate profits and the state of public finances. It is also partly due to the low interest rate level, immigration and internal migration flows, as well as the investment backlog that has accumulated in areas like infrastructure since the financial crisis. There are also clear constraints on the public sector’s scope to take action. This is reflected in the cautious approach to taxation and the subsidy policy adopted by several German Länder. In some places high vacancy rates and/or excessively high real-estate prices are also preventing a stronger upturn in construction activity.
Construction demand is expected to be strongest in Hungary (around 25%), the second smallest market in the EUROCONSTRUCT area, followed by Ireland (15%), Sweden (10%), and Poland (9%). Hungary will also post the highest growth rates for the next three years through 2020 (33%). In addition to state subsidies for residential construction, the more consistent use of EU funds for non-residential construction will also play an important role. In the three-year growth projections Hungary is once again followed by Ireland (28%), Poland (25%), the Czech Republic and Portugal (15% respectively).
The European construction sector has been on a growth path since 2014. Construction output has increased by a total of 9 percent over the four year period from 2014 to 2017. The Euroconstruct network has the following 19 members: Belgium, Denmark, Germany, Finland, France, Britain, Ireland, Italy, The Netherlands, Norway, Austria, Poland, Portugal, Sweden, Switzerland, Slovakia, Spain, the Czech Republic and Hungary.