Predicted Decline: European construction sector anticipates substantial reduction in newly completed buildings by the year 2025. - Increase in Uncompleted Buildings in Europe by 2025: Predicted Drop in Construction Completions by Significant Margins
The construction sector in Europe is gearing up for a year of mixed fortunes, with some countries experiencing a surge in apartment construction while others grapple with a decline, according to the latest reports from the Ifo Institute for Economic Research.
## Improving Business Sentiment in Germany
In Germany, businesses, including construction firms, are showing improved expectations, driven by a growing belief in a better economic future as the German government increases spending and stimulus measures. According to the KfW-ifo SME Barometer (June 2025), construction and services are among the sectors with the strongest improvement in sentiment compared to others.
## Key Factors Affecting New Construction
Despite the improving business sentiment, construction costs remain a significant challenge. Persistent inflation and high material prices continue to dampen the rate of new projects. Demographic trends, including aging populations and regional migration, are influencing demand for different types of new construction. Urbanization and the need for affordable housing remain strong, but funding and cost constraints are limiting supply.
The German government has pledged significant new stimulus measures, which are expected to bolster domestic demand and help counteract some of the cost pressures. However, regional differences exist, with construction companies in Eastern Germany more negative about current business and somewhat more pessimistic about future business development.
## Europe-wide Trends
Across Europe, the outlook for new building construction is varied. In a still very challenging market, the framework conditions have improved somewhat, according to Ifo construction expert Ludwig Dorffmeister. Only the countries of the Czech Republic, Sweden, and Hungary are expected to see an increase in apartment construction, with more apartments forecast to be built than in the previous year.
In contrast, Italy, with a construction rate lower than in Germany, the UK, Spain, and France, is expected to see a significant decline in the number of completed new buildings. The Ifo Institute for Economic Research has stated that the market conditions have improved somewhat, but challenges such as higher interest rates, loss of purchasing power, and increased construction costs are hindering construction activity in many countries.
## Summary
For 2025, the Ifo Institute and related research suggest that new building construction in Germany is set to recover gradually, supported by improved business sentiment and government stimulus. However, high construction costs and affordability challenges, along with regional variations, are moderating the pace of growth. In Europe, similar dynamics are likely, though specific conditions may vary by country. The construction sector is expected to see modest gains, particularly in urban and service-oriented regions, but cost and demographic factors will continue to shape outcomes.
Approximately 205,000 apartments are forecast to be completed in this country this year. By 2026, experts predict only 185,000 new apartments will be completed - a further ten percent decrease.
In the European context, while some EC countries, such as the Czech Republic, Sweden, and Hungary, projects a rise in apartment construction, others like Italy are anticipating a decline. To counteract the high construction costs, investing in vocational training for construction workers could increase the efficiency of projects and reduce costs in the long run. Simultaneously, tapping into real-estate financing for both private and public sectors can serve as a viable means for enhancing construction activity, particularly in urban areas with high demand for affordable housing.
