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Demand for new building projects declining in Europe

  • December 8, 2023
  • 2 min read
Demand for new building projects declining in Europe

High interest rates and rising building costs have drastically reduced demand for new buildings throughout Europe, according to ING. Ongoing projects and a heightened focus on sustainability have prevented construction volumes from shrinking. However, a steep decline is expected in 2024.

ING predicts zero growth for EU construction volumes this year, an improvement over its previous forecast. This is mainly due to a better-than-expected first half of the year. Construction volumes remain high. In June 2023, EU construction production was at the same level as the previous year. Firms have a healthy backlog of work with 8.9 months of guaranteed projects from the third quarter of this year.

However, there are clear signs that volumes will begin shrinking once the late cyclical nature of the sector starts taking effect, ING says. Home buyers and firms are reluctant to invest in new premises thanks to a weaker economy, high  interest rates, and increased building costs. It is likely to take a while before these effects are reflected in construction output volumes because of long lead times.

Even the manufacture of cement, bricks, and concrete, ING predicts, are facing sharp production declines. Building materials are registering an average fall in production by 13% in June compared with the same period the previous year.  Austria (-15.0%), Germany (-15.6%), and The Netherlands (-19.5%) all saw the largest decline.

Other indicators include a decrease in building permits, confidence, and demand in the second half of 2023 and going into 2024.

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