Press release

Construction proves to be robust in the medium term

January 24, 2023

  • European construction sector stagnates for the time being
  • German construction industry senses further headwind
  • Significant decline in apartment construction in Germany

The ifo Institute presented the results of the industry outlook for the German and European construction sector in the period up to 2025 during the BAU consultations. BAU, the world’s leading trade fair for architecture, materials and systems, will take place in Munich from April 17 to 22, 2023.

Increasing construction loan interest, high realization costs and economic slowdown—there are many challenges facing the construction industry. How will the situation develop for manufacturers and providers of materials and systems in the construction sector in the medium term? Initial answers to this question are provided in a European market analysis, in which the ifo Institute was involved. Ludwig Dorffmeister, consultant for construction and real estate research, presented the key points at the BAU consultations.

European construction sector stagnates for the time being

Following the significant growth in 2021 and 2022 (+ 5.8 percent and + 3.0 percent), the European construction sector will escape a further decline. This year and the next, the market will stagnate, and will only grow by one percent in 2025. Sources of innovation will include the government aid in the modernization of building construction, some considerable investment needs in the housing and infrastructure sector, and the once again significantly more positive economic outlook as of 2024.

“The European construction sector will benefit in particular from the growing demand for construction in France, Spain and Great Britain. There, growth lies between two and a half and nearly seven percent. On the whole, the market may grow by around €26 billion by 2025,” explains Ludwig Dorffmeister.

German construction industry senses further headwind

Following two subdued years, German construction services will grow slowly at best in 2023. Non-residential building construction is not expected to record any more losses in the current year after the past market correction. In the course of the economic recovery and after the inflation shock has settled, commercial and public building construction will pick up again by 2024 at the latest. The market analysis predicts that the scope of building measures for new and existing non-residential buildings in Germany will be around one percent greater in 2025 than it was in 2022. In light of some considerable investment needs, the civil engineering sector is also expected to pick up pace again as of 2024 and grow by a total of two percent by 2025.

Significant decline in apartment construction in Germany

The fact that the German construction sector will ultimately only stagnate in the period from 2021 to 2025 is due to the imminent end of the long-lasting upward trend in residential construction. The large construction backlog and the long project implementation times will initially stabilize the new building market. However, from 2024 onwards, the consequences of the great reluctance on the part of project developers, “house builders” and housing companies are likely to have more and more of an impact. For this reason, Ludwig Dorffmeister predicts that: “For the current year, a small plus can be expected in the housing sector, which also includes construction work on existing buildings. It’s downhill after that.”

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Felix Kirschenbauer
Felix Kirschenbauer
  • PR Manager