— By Plasteurope.com correspondent — 

High interest rates, soaring construction costs, and rocketing house prices played havoc with Europe’s new residential construction market in 2024, but experts are hopeful conditions – and the sector’s overall performance – will improve in 2025.

Last year, the sector was battered by several headwinds all at once. Struggling economies, the continued impact of the war in Ukraine and localised domestic supply chain issues combined to force down construction output across Western Europe by an estimated 2.4%, according to forecasting group Euroconstruct (www.euroconstruct.org).

Of the region’s major economies, France’s output fell by 4.6%, Italy’s by 3.3%, and Germany’s by 2.8%. In the UK, Euroconstruct said output slipped by 0.8%. However, some countries saw activity rise in 2024. Spain’s construction output grew by 2%, Portugal’s by 1.5%, and Ireland’s by 1.4%.

But for those witnessing declines, the tide could turn in 2025, with recovering refurbishment markets and areas of government-backed activity brightening prospects for this year. Upgrades of transport and infrastructure networks in particular would help to fuel a recovery, Euroconstruct added.

A major burden for the construction sector is the price of materials and labour, but cost inflation is predicted to ease this year, according to consultants Linesight (Dublin; www.linesight.com).

In an industry update published late last year, Richard Joyce, Linesight Europe’s managing director, said that most countries would see increases in construction output in 2025, “with a few exceptions. The UK and Denmark are expected to see a marginal decline, and Italy a more pronounced contraction of nearly 8.7%.”

Linesight’s report said construction output was expected to rebound in 2025 across most countries in Europe, “driven by significant public investments in energy and infrastructure, as well as increased funding in data centres, pharmaceuticals, and green hydrogen”.

However, Joyce sounded a note of caution: “Key challenges [that] remain on the horizon include persistent labour shortages in mission-critical sectors, dwindling contractor availability due to high demand, and increases in insolvency rates.”

Other issues could arise, and existing ones could be exacerbated by the fallout from recent political events in the US and Germany, he added.

And while 2025 started with less of a bang, more of a whimper, there are indications that the downward trends seen in 2024 have begun to ease.

Related: Eurozone construction activity slides again

According to the latest data from Hamburg Commercial Bank (HCOB), despite construction activity across the Eurozone being stuck in slump mode in January, with new orders falling sharply, total activity declined at the weakest rate in nearly two years.

HCOB’s Eurozone Construction PMI Total Activity Index – a seasonally adjusted index that tracks monthly changes across the sector – rose from 42.9 in December to 45.4 in January, indicating a sharp, albeit softer, contraction in activity across the euro-area construction sector. A score coming in below 50.0 represents a decline.

HCOB said the latest downturn extended the current sequence of falling activity to 33 months, but that it was the softest since February 2023.

Digging down into specific countries, economic conditions depressed construction activity in Germany in January, although in line with other territories, HCOB said “its rate of contraction slowed to the weakest for more than a year-and-a-half, and firms were less downbeat about the outlook than in recent months”. The country’s total industry activity index score came in at 42.5 in January, up from 37.8 in December, the highest seen since May 2023.

Related: German construction sector sees massive volume reduction, falling prices

Ongoing demand weakness continued to hit constructors in France, where HCOB’s index posted a score of 44.5, still below the key 50.0 mark, but up from 42.6 in December and signalling the slowest rate of decline since November 2023.

Italy’s construction sector started 2025 in positive territory, fuelled by growth in residential activity, but while its index score for January registered 50.9, this was slightly down on December’s 51.2.