“A recovery in the new-build market in 2024 and 2025 will result in a stronger overall development towards the end of the forecast period.”
Dutch GDP grew by 0.7% in 2023 despite heavy inflation pressures and a tight labour market which, despite unwinding a bit from 2024 onwards, will remain tight. This will put continuous pressure on the labour market. GDP growth will continue above 1% in the coming years. The effects of high inflation have led to a decline in household purchasing power in 2022 and 2023, which will stabilize in 2024.
A strong increase in construction costs in 2021-2023, followed by rising interest rates has worsened the business case for new housing projects. As the effect of rising interest rates was also felt by people applying for mortgages who were already dealing with lower household purchasing power, housing prices started to drop. The resulting increase in the cost of construction and lending, coupled with lower demand and lower housing prices has caused the amounts of new houses sold pre-construction to collapse while permits for new houses have also dropped. While residential renovation, due to government incentives, will continue to grow at a steady pace, new residential construction will drop by 8% in 2024 and only grow again by 3% and 4.8% in 2025 and 2026.
The negative effects described above will show their effect on the non-residential sector from 2024. New non-residential construction will decline by almost 4.5% a year until 2026. The renovation market will keep growing for the same reasons as in the residential market.
Civil engineering is dealing with local government budgets that are under pressure and make up a large part of the market. Civil engineering output will decline by 1.4% in 2024, after which it will only start growing substantially again in 2026. A subsector swimming against the stream is energy network construction, which will see yearly budgets double from €4 billion in 2023 to €8 billion in 2025.
