The Construction Industry is on the Cusp of a Trend Shift. After five years of decline, the price-adjusted construction volume is expected to grow by two percent in 2026, according to a new analysis by the German Institute for Economic Research (DIW), reported by Spiegel. For 2024, a decline of nearly four percent is still expected, and for 2025, a slight decrease of almost one percent is forecasted.
“We will see positive numbers in the construction volume in 2026 after really four tough years” said study author Martin Gornig to the news magazine. The situation is already stabilizing this year, according to Gornig and his colleagues, mainly due to the recently slightly reduced interest rates, which make building more affordable. Economists also expect the economy to recover in the second half of this year, and then households may start to spend their increased savings on new housing projects, which will be realized in 2026.
“With the revival of the economy in the second half of the year, a stabilization of the labor market, and a stable interest rate, households should regain confidence in the future and invest more in new projects” the study says. In 2026, the construction of new homes is expected to grow more strongly because many projects can be implemented faster due to the currently low capacity utilization. According to the study, the growth will be greatest in infrastructure construction, as many large infrastructure projects and energy and broadband expansion projects are being implemented despite the crisis.
However, even if the construction volume grows again in the coming year, it will not be enough to make up for the crisis of the past years. The volume will still be about seven percent below the peak of 2021, the DIW says. The situation is even more dramatic for new home construction, where the volume is expected to be around 25 percent below the 2021 level in 2026. “The positive outlook should not obscure that the past years have torn a huge gap between demand and supply in the construction industry” said DIW researcher Gornig.
Therefore, he and his colleagues are advocating for an immediate program for social housing. In this, municipalities with tight housing markets should receive more federal funding. The legal framework for a faster implementation on a federal level should also be created.